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Xiaoyao Powder, originally documented in the Taiping Huimin Heji Jufang(Beneficial Formulas from the Taiping Imperial Pharmacy), possesses the therapeutic actions of soothing the liver and nourishing the blood, as well as fortifying the spleen and dispelling dampness. It is regarded as one of the representative formulas within the harmonizing and releasing category. Subsequent generations have continuously modified this formula to accommodate evolving clinical demands. In recent years, this formula has been extensively applied in the prevention and treatment of breast cancer. This article retrieves and collates relevant literature from the past two decades to summarize the application of modified Xiaoyao Powder in breast cancer across three domains: formula and syndrome analysis, clinical research, and mechanism investigation. Formula and syndrome analysis reveals that this formula is particularly adept at addressing disorders arising from emotional disturbances and dysregulation of Qi and blood, aligning closely with the pathogenesis of liver depression and Qi stagnation as well as Qi and blood deficiency observed in breast cancer patients. In terms of clinical research, this formula can ameliorate breast cancer-associated complications such as climacteric-like syndrome, anxiety, depression, insomnia, and fatigue. It serves as an adjunct to surgical intervention, radiotherapy, and chemotherapy to improve therapeutic efficacy, reduce recurrence and metastasis rate, and modulate immune function. Furthermore, it exerts a certain inhibitory effect on precancerous breast lesions. Mechanistically, this formula demonstrates capacities to inhibit breast cancer proliferation and metastasis, induce apoptosis, regulate the tumor microenvironment and macrophage function, bidirectionally modulate the endogenous antioxidant system, suppress the "brain-mammary neural connection", and reverse cellular drug resistance. Through the aforementioned three aspects, this article provides a comprehensive exposition of the current research status of modified Xiaoyao Powder in the treatment of breast cancer, summarizes existing limitations in both clinical and mechanistic investigations, and proposes corresponding improvements, with the aim of providing a foundation and conceptual framework for subsequent in-depth studies.