Vanadium dioxide (VO₂), as a transition metal oxide, has thermochromic property, which undergoes metal to insulator transition (MIT) in response to external temperature changes, and is accompanied by numerous changes in physical property. It has attracted widespread attention in the field of smart windows. In recent years, research on the preparation method of VO₂, the phase change mechanism, and the improvement of optical performance are quite rich. However, practical applications still face technical bottlenecks and challenges such as higher intrinsic transition temperature (T_c), lower luminous transmittance (T_lum), insufficient solar modulation ability (ΔT_sol), nonideal metastability and durability, and uncomfortable color for human eyes (brownish yellow). At present, there are many researches related to the improvement of the performance of VO₂ itself owing to its insufficient optical property, and general methods for improving its performance such as elements doping, multilayer film structure design, and microstructure design have been widely adopted. This review summarizes the general performance improvement strategies of VO₂ film, and highlights the latest research progress of VO₂-based smart window service performance, low-temperature flexible preparation and color modulation in practical applications. Future development trends are also discussed in terms of skin comfort and environmental friendliness.