Photodynamic inactivation (PDI) is an emerging and environmentally friendly approach for water disinfection and remediation. It relies on the activation of photosensitisers (PSs) by light—preferably sunlight—to generate reactive oxygen species (ROS) that can inactivate a broad spectrum of pathogens, including multidrug-resistant strains, and also shows promise in the degradation of emerging chemical pollutants and antibiotic resistance genes. Both free and immobilised PSs have been successfully applied in laboratory and pilot studies, with immobilisation offering advantages in reuse and environmental containment, and among the PSs studied, cationic porphyrins have proven particularly effective due to their tuneable structures and high ROS yields. Despite these advantages, PDI remains underutilised in practice. Key challenges include non-selective phototoxicity, limited effectiveness against biofilms and resistant life stages, need for standardised protocols, and reduced efficacy in turbid or complex water matrices. Nonetheless, combining PDI with other treatment methods, optimising PS and light parameters, and integrating existing infrastructure could improve its practical feasibility. This review highlights the current state of research on PDI for water disinfection, with a focus on its mechanisms, applications, limitations, and future prospects. Given the increasing need for sustainable and effective water treatment technologies, PDI represents a valuable candidate for further development and implementation.