This work focuses on the developments related to lycopene, a natural carotenoid and bioactive compound, particularly with reference to its chemistry and biological activity and its potential health effects. The formation of free radicals or other compounds in the body that are able to oxidize lipids, proteins, and DNA (also known as oxidative stress) is one of the major risk factors for chronic diseases. There is considerable evidence that lycopene has a protective effect against cardiovascular disease, hypertension, atherosclerosis, skin damage, and certain types of cancer such as prostate, breast, lung, and others. Because of this, the presence of lycopene in the diet is considered to be of great value. Dietary lycopene may increase the lycopene level in the body and act as an antioxidant. It may trap reactive oxygen species resulting in an increase in the overall antioxidant potential or a reduction in the oxidative damage to lipids (lipoproteins, membrane lipids), proteins (important enzymes), and DNA (genetic material), thereby lowering the oxidative stress. Alternatively, the increase in serum lycopene level may regulate gene functions, with the enhancement of intercellular communication (responsible for cell growth), modulating hormonal and immune response, regulating metabolism, and thus lowering the risk of chronic diseases. These mechanisms may also be interrelated and may act simultaneously to provide health benefits. Lycopene is quickly absorbed from different food sources (mainly tomato products) and distributed to corporal tissues where it maintains its antioxidant properties. This absorption varies depending on various factors such as food source, food processing, and other components in the diet. The human body is unable to synthesize carotenoids, such as lycopene, so a suitable diet intake is necessary to reach the adequate levels. In this review, the new developments in lycopene analysis by spectroscopic and chromatographic techniques along with mathematical modeling are also considered. These advances have made it possible to evaluate and determine the biological activity of lycopene in natural products. All this knowledge about the chemistry and biological activity of lycopene will be very helpful for the food industry, providing new opportunities in the field of food product development.