Aqueous zinc-iodine (Zn-I₂) batteries have attracted considerable attention as an alternative to lithium-ion batteries. However, critical challenges exist at both the cathode and anode, including self-discharge, sluggish reaction kinetics, limited energy density, and undesired side reactions, which hinder their practical implementation. As a core component of the battery systems, electrolytes play a vital role in conducting ion transportation and promoting interfacial reactions. Recent advances in electrolyte engineering have addressed these coupled interfacial challenges and opened new pathways to unlock the full potential of Zn-I₂ batteries. In light of these developments, this review provides a comprehensive update on electrolyte engineering strategies aimed at overcoming key limitations and enhancing overall battery performance. Special emphasis is placed on effective iodine-confining additives, solvation structure tuning, and recent advances in solid-state electrolyte development, all of which offer promising solutions for enhancing performance and improving durability. Finally, guidelines and future directions for electrolyte development are discussed to advance the understanding of Zn-I₂ battery electrochemistry and promote their practical applications in the near future.