Microbial communities (microbiomes) are integral to all ecosystems, driving critical molecular functions that shape host health and environmental processes. Recent advances in multi-omics technologies, functional genomics, and computational modeling have transformed our ability to decode the molecular mechanisms underlying microbiome function, unravel the drivers of microbiome dynamics, and quantify microbial contributions to host physiology and environmental biogeochemistry. This review synthesizes key progress (2022–2025) in microbiome molecular function research, focusing on three core themes: (1) functional analysis of microbial communities, including the characterization of metabolic pathways, signaling networks, and functional redundancy; (2) molecular drivers of microbiome dynamics, such as host-microbe signaling, environmental cues, and horizontal gene transfer (HGT); and (3) microbial contributions to host physiology (e.g., metabolism, immune regulation) and environmental processes (e.g., nutrient cycling, bioremediation). We highlight emerging technologies enabling high-resolution functional profiling and discuss current challenges in linking taxonomic composition to molecular function. Finally, we outline future directions for translating functional microbiome research into therapeutic, agricultural, and environmental applications. This review underscores the central role of molecular functions in defining microbiome impacts, providing a framework for advancing our understanding of microbiome biology and harnessing microbial functions for global challenges.