The aqueous two-phase system (ATPS) is an all-aqueous system fabricated from two immiscible aqueous phases. It is spontaneously assembled through physical liquid-liquid phase separation (LLPS) and can create suitable templates like the multicompartment of the intracellular environment. Delicate structures containing multiple compartments make it possible to endow materials with advanced functions. Due to the properties of ATPSs, ATPS-based drug delivery systems exhibit excellent biocompatibility, extraordinary loading efficiency, and intelligently controlled content release, which are particularly advantageous for delivering drugs in vivo. Therefore, we will systematically review and evaluate ATPSs as an ideal drug delivery system. Based on the basic mechanisms and influencing factors in forming ATPSs, the transformation of ATPSs into valuable biomaterials is described. Afterward, we concentrate on the most recent cutting-edge research on ATPS-based delivery systems. Finally, the potential for further collaborations between ATPS-based drug-carrying biomaterials and disease diagnosis and treatment is also explored.