Arbuscular mycorrhizal fungi (AMF) are soil microorganisms that play an important role in terrestrial ecosystems. This review highlights the diverse functions of AMF and emphasizes their potential as biological tools to address current and future environmental challenges. They contribute to organic matter decomposition, with evidence that AMF enhance soil microbial activity and nutrient cycling in organic-rich soils. AMF also improve soil structure by increasing aggregate stability. In plant communities, AMF influence reproductive phenology, and promoting higher germination rates and biomass accumulation in different species, especially herbs and shrubs. These fungi are involved in climate change mitigation by enhancing carbon sequestration and buffering environmental stressors such as prolonged drought. Despite these well-documented functions, research on AMF has primarily focused on their role in nutrient transport, overlooking their broader ecological implications. Key ecological filters, such as elevation, nutrient availability, host identity, and anthropogenic activities, modulate AMF community structure and functionality. In conclusion, AMF are a multifunctional biotic component of soils because they are involved in a variety of ecological processes. Future research should address the multifunctionality of AMF in soil quality, their interactions with other soil microbiota, and their potential applications in large-scale ecological restoration.