Tea tree essential oil (TTO), extracted from Melaleuca alternifolia leaves, is increasingly recognized as a powerful natural antimicrobial for modern food safety applications due to its terpene-rich composition and broad biological activity. Dominant constituents such as terpinen-4-ol, γ-terpinene, and α-terpinene contribute to strong antibacterial, antifungal, and antibiofilm effects, positioning TTO as a clean-label alternative to synthetic preservatives. This review synthesizes current knowledge on the physicochemical properties of TTO, including chemotype variability, hydrophobicity and solubility constraints, oxidative instability, and interactions with food components that influence its functionality. The antimicrobial mechanisms of TTO against major foodborne pathogens and spoilage fungi are examined, emphasizing membrane disruption, disturbance of cellular homeostasis, oxidative stress induction, and quorum-sensing interference. Recent advances such as nanoemulsions, encapsulation, and polymer-based delivery systems have improved TTO stability, reduced volatility, and enabled controlled release, supporting its incorporation into edible coatings, active packaging, and sanitation formulations. These innovations enhance microbial reduction in fresh produce, meat, dairy, and minimally processed foods. Remaining challenges include sensory impacts, volatility losses, regulatory limitations, and concentration-dependent toxicity. Overall, current evidence underscores TTO’s potential as a versatile, sustainable antimicrobial for next-generation food protection strategies.