Increasing pharmacological evidence supports that paeoniflorin, a water-soluble monoterpene glycoside isolated from Paeonia lactiflora Pall. (Shaoyao in Chinese), has a wide range of medicinal properties including anti-inflammatory, antioxidant, antithrombotic, anticonvulsive, analgesic, cardioprotective, neuroprotective, hepatoprotective, antidepressant-like, antitumoral, and immune-regulatory activities; as well as enhancing cognition and attenuating learning impairment. In addition to pharmacodynamic studies, information on pharmacokinetics is also significant for the further development and utilization of paeoniflorin. The present review focuses on the absorption, distribution, metabolism, and excretion of paeoniflorin, especially main pharmacological activities of paeoniflorin on inflammation and immune function. According to the findings obtained both in vitro and in vivo, a broad application prospect has been opened for paeoniflorin. However, further studies are needed to clarity the direct molecular mechanisms and key targets underlying the beneficial effects of paeoniflorin on inflammation and immunity.