Mugwort leaf and stem are used medicinally. Mugwort acts as a bitter digestive tonic, uterine stimulant, nervine, menstrual regulator, and antirheumatic. The volatile oil of mugwort includes thujone, linalool, borneol, pinene, and other constituents. The herb also contains hydroxy-coumarins, lipohilic flavonoids, vulgarin, and triterpenes.

Mugwort acts as an emmenagogue, an agent that increases blood circulation to the pelvic area and uterus and stimulates menstruation. It is a useful remedy for painful and irregular menstruation. A compress of the herb has been used to help promote labor and assist with expulsion of the afterbirth. A mild infusion of mugwort is useful as a digestive stimulant. It is helpful in cases of mild depression and nervous tension. The herb also may stimulate the appetite. A weak infusion of mugwort has sedative properties that may quiet restlessness and anxiety. Its antispasmodic action may relieve persistent vomiting, and has been used in the treatment of Epilepsy. Mugwort added to bath water is an aromatic and soothing treatment for relief of aches in the muscles and joints.

In a clinical trial, crushed fresh mugwort leaves applied to the skin were shown to be effective in eradicating warts. Taken as an infusion, mugwort is helpful in ridding the system of pinworm infestation. Dried mugwort leaf also acts as a natural tinder, useful in holding a smoldering fire. The dried herb has also been smoked as a nicotine-free tobacco. A species of mugwort, common in the southwestern United States, was used by some western Native Americans as a prevention for poison oak rash. The fresh mugwort leaf was rubbed over areas of exposed skin before walking into poison oak habitat. The two plants often grow near one another.

In Chinese medicine mugwort, known as Folium Artemisiae Argyi (Aiye) or Hao-shu is highly valued as the herb used in moxibustion, a method of heating specific acupuncture points on the body to treat physical conditions. Mugwort is carefully harvested, dried and aged, then it is shaped into a cigar-like roll. This "moxa" is burned close to the skin to heat the specific pressure points. It has been used in this way to alleviate rheumatic pains aggravated by cold and damp circumstances. Mugwort has also been used in various size cones that are places on the skin directly or on top of an herb or some salt and burned. In Japan, some practitioners only use moxa for treatment.

Study reported on the successful use of moxibustion in reversing breech birth positions. The study found that 75% of 130 fetuses had reversed their position after moxibustion treatment of the mother. The technique is said to stimulate the acupuncture point known as BL67, located near the toenail of the fifth toe, stimulating circulation and energy flow and resulting in an increase in fetal movements. In Chinese medicine, mugwort is ingested to stop excessive or inappropriate menstrual bleeding. Mugwort has also been used in Brazilian folk medicine as a remedy for Peptic Ulcer. Researchers have found that the plant contains antioxidants which help to explain its protective effects on gastric tissues.

More recently, mugwort has attracted attention as the source of a natural compound, artemisinin, which has been shown to have antimalarial properties. Artemisinin is a promising natural remedy for malaria because of its low toxicity and its effectiveness against drug-resistant mutations of the malaria parasite. In addition to its effectiveness in treating malaria, artemisinin is also being tested as a possible anticancer drug.