Onion peels are often discarded, representing an unlimited amount of food by-products; however, they are a valuable source of bioactive phenolics. Thus, we utilized UPLC-MS/MS to analyze the metabolomic profiles of red (RO) and yellow (YO) onion peel extracts. The cytotoxic (SRB assay), anti-inflammatory (Griess assay), and antimicrobial (sensitivity test, MIC, antibiofilm, and SP-SDS tests) properties were assessed in vitro. Additionally, histological analysis, immunohistochemistry, and ELISA tests were conducted to investigate the healing potential in excisional skin wound injury and Candida albicans infection in vivo. RO extract demonstrated antibacterial activity, limited skin infection with C. albicans, and improved the skin’s appearance due to the abundance of quercetin and anthocyanin derivatives. Both extracts reduced lipopolysaccharide-induced nitric oxide release in vitro and showed a negligible cytotoxic effect on MCF-7 and HT29 cells. When extracts were tested in vivo for their ability to promote tissue regeneration, it was found that YO peel extract had the greatest impact. Further biochemical analysis revealed that YO extract suppressed NLRP3/caspase-1 signaling and decreased inflammatory cytokines. Furthermore, YO extract decreased Notch-1 levels and boosted VEGF-mediated angiogenesis. Our findings imply that onion peel extract can effectively treat wounds by reducing microbial infection, reducing inflammation, and promoting tissue regeneration.