Gegen Qinlian Decoction (GQD), a classic traditional Chinese medicine formula recorded in Shang Han Lun, has been used clinically for approximately two thousand years. In recent years, its potential roles in ulcerative colitis (UC) and colorectal cancer (CRC) have attracted increasing attention because of the multi-component, multi-target, and multi-pathway regulatory characteristics of traditional Chinese medicine (TCM). UC is a chronic relapsing inflammatory disease and an important risk factor for CRC. Although emerging immunomodulators, biologics, and targeted therapies have achieved certain efficacy in the treatment of UC and CRC, limited response, drug resistance, adverse effects, and disease recurrence remain major challenges for some patients. Persistent intestinal inflammation can disrupt the epithelial barrier, alter gut microbiota, induce immune imbalance, enhance oxidative stress, and activate pro-tumorigenic signaling, thereby contributing to the transition from UC to CRC. Within this inflammation-to-cancer framework, preclinical evidence suggests that GQD may exert comprehensive regulatory effects on multiple pathological processes. It may suppress inflammatory signaling pathways such as TLR4/NF-κB, IL-6/JAK2/STAT3, and the NLRP3 inflammasome, regulate Th17/Treg balance and macrophage polarization, restore epithelial barrier integrity, reshape gut microbiota homeostasis, and modulate oxidative stress, abnormal cell death, and metabolic dysregulation. These effects may act synergistically to limit the transition from an inflammatory microenvironment to a pro-tumorigenic microenvironment. In established CRC, GQD appears more suitable as a potential adjunctive therapy rather than a primary cytotoxic anticancer agent, with possible roles in reducing inflammation-associated tumor-promoting signals, remodeling the tumor immune microenvironment, enhancing responses to chemotherapy or immunotherapy, and mitigating treatment-related intestinal toxicity. In summary, GQD may have potential important value in the treatment of UC and CRC, and this review provides a reference for future research and clinical application.