Vermicomposting is a complex yet efficient biological process in which earthworms play a pivotal role in breaking down and stabilizing organic residues, enhancing soil quality, and enabling efficient nutrient recycling. During this process, microorganisms and digestive enzymes present in the earthworms’ guts facilitate the breakdown of complex compounds like cellulose, lignin, and proteins, converting them into simpler, more bioavailable forms. Additionally, earthworms enhance the physical structure of the compost by improving aeration and moisture retention, which are essential for efficient decomposition. The resulting vermicompost serves as a valuable soil amendment, improving soil fertility and supporting plant growth by providing essential macronutrients and micronutrients. Its application in agriculture has been associated with improved seed germination, increased crop yields, and enhanced resilience to environmental stress. Beyond its agronomic benefits, vermicomposting plays a role in sustainable waste management, contributing to circular economy principles by converting organic residues into a high-value product. Vermicomposting also contributes to global and regional sustainability initiatives. It supports the European Green Deal and the EU Soil Strategy for 2030 by promoting sustainable soil management and a circular economy. It aligns with several United Nations Sustainable Development Goals (SDGs), including those focused on sustainable agriculture, food security, and environmental sustainability. This chapter examines the mechanisms underlying earthworm-mediated composting, its impact on soil health, and its potential applications in sustainable agriculture. By harnessing the natural capabilities of earthworms, vermicomposting has proven to be a promising solution for the management of organic waste and improving soil quality.