Transfer RNAs (tRNAs) are a class of non-coding RNAs responsible for amino acid translocation during protein synthesis and are ubiquitously found in organisms. With certain modifications and under specific conditions, tRNAs can be sheared and fragmented into small non-coding RNAs, also known as tRNA-derived small RNAs (tDRs). With the development of high-throughput sequencing technologies and bioinformatic strategies, more and more tDRs have been identified and their functions in organisms have been characterized. tRNA and it derived tDRs, have been shown to be essential not only for transcription and translation, but also for regulating cell proliferation, apoptosis, metastasis, and immunity. Aberrant expression of tDRs is associated with a wide range of human diseases, especially with tumorigenesis and tumor progression. The tumor microenvironment (TME) is a complex ecosystem consisting of various cellular and cell-free components that are mutually compatible with the tumor. It has been shown that tDRs regulate the TME by regulating cancer stem cells, immunity, energy metabolism, epithelial mesenchymal transition, and extracellular matrix remodeling, playing a pro-tumor or tumor suppressor role. In this review, the biogenesis, classification, and function of tDRs, as well as their effects on the TME and the clinical application prospects will be summarized and discussed based on up to date available knowledge.