Depot formulations are innovative drug delivery systems designed to deliver the active pharmaceutical ingredient in a “sustained” or “controlled” manner, consequently aiding in the maintenance of a stable drug concentration level in the bloodstream. The depot formulations help in addressing a major obstacle in the clinical management and improvement of chronic illness, which is poor patient adherence and compliance to the lengthy treatment regimen. This article throws light on the background of depot formulations from how they evolved from simple oil-based solutions to modern polymer-based systems. It comprehensively discusses the development, classification and clinical significance of depot formulations. Further, the article covers their mechanism of action with a key focus on polymer-based depots, oil-based depots and microparticles. Additionally, the review addresses the key challenges in the formulations and production of the depot systems such as drug candidate selection, encapsulation efficiency and biocompatibility. It also highlights future directions, with an emphasis on the rapidly developing fields such as nanotechnology, polymer technology and digital health tools which could potentially produce numerous beneficial innovations in the field of depot formulations.