<p>Water-guided laser processing technology is a precision machining technology that uses a water jet to guide a laser to the surface of a substrate. With the rapid development of the new era, the processing requirements for precision parts in the fields of new energy, semiconductors, and biomedicine are also increasing, and the original components tend to be miniaturized and refined, which puts forward higher requirements for the processing technology. Water-guided laser processing has the advantages of high precision, high speed, and no wear and tear of the processed parts, and also makes up for the defects of the traditional laser processing such as the obvious taper of the incision, the susceptibility to heat-affected zone, and cracks, etc., which is a very novel “cold processing” technology. Based on the current international research results, this paper provides a more detailed review of the key technologies for the stable generation of water jet by water-guided laser. Discussed the theoretical research related to the water-guided laser processing technology and analyzed the formation principle of water-guided laser. Combined with the water-optical coupling process for a systematic exposition. The application of water-guided laser in several materials is introduced in detail. The technical difficulties of water-guided laser cutting are analyzed and the future trends of the technology are prospected.</p>