Circulating tumor DNA (ctDNA) sequencing holds considerable promise for early diagnosis and detection of surveillance and minimal residual disease. Blood ctDNA monitors specific cancers by detecting the alterations found in cancer cells, such as apoptosis and necrosis. Due to the short half-life, ctDNA reflects the actual burden of other treatments on tumors. In addition, ctDNA might be preferable to monitor tumor development and treatment compared with invasive tissue biopsy. ctDNA-based liquid biopsy brings remarkable strength to targeted therapy and precision medicine. Notably, multiple ctDNA analysis platforms have been broadly applied in clinical immunotherapy. Through targeted sequencing, early variations in ctDNA could predict response to immune checkpoint inhibitor (ICI). Several studies have demonstrated a correlation between ctDNA kinetics and anti-PD1 antibodies. The need for further research and development remains, although this biomarker holds significant prospects for early cancer detection. This review focuses on describing the basis of ctDNA and its current utilities in oncology and immunotherapy, either for clinical management or early detection, highlighting its advantages and inherent limitations.