Alginate is a group of polyuronic saccharides that are widely used in pharmaceutical and food industry due to its unique physicochemical properties and beneficial health effects. However, the low water solubility and high viscosity of alginate hampered its application. Alginate oligosaccharide (AOS) is a decomposition product of alginate and has received increasing attention due to its low molecular weight, high water solubility, safety, and non-toxicity. The wide-ranging biological functions of AOS are closely related to its structural diversity. AOS with distinct structures and biological functions can be obtained by different methods of preparation. This review summarized the biological functions of AOS reported to date, including anti-tumor, immunomodulatory, anti-inflammatory, antioxidant, prebiotic, and anti-diabetes. The preparation of AOS, as well as the relationship between the structure and biological functions of AOS were discussed, with the aim to provide a reference for further development and application of AOS.