Traditional medicine uses various Stachys species to enhance athletes’ performance and treat injuries, tumors, asthma, skin inflammations, stress, and gastrointestinal disorders. The present study’s purpose was to identify Stachys palaestina volatile oil (VO) components and assess its antimicrobial and cytotoxic properties. Gas chromatography-mass spectrometry (GC–MS) analyses identified 26 compounds representing 100% of the total oil. Limonene (30.33%), α-pinene (22.32%), and neryl acetate (13.73%) were the major oil components and comprised of hydrocarbon monoterpene (69.83%) and oxygenated monoterpenoid (28.54%). The VO exhibited moderate cytotoxic effects on the tested tumor cell lines, while demonstrating no harmful effects on normal LX-2 cells. Furthermore, it effectively suppressed the growth of CaCo-2, HeLa, MCF-7, HepG2, Hep3B, B16F1, and LX-2 cells by 99.19%, 99.27%, 99.13%, 99.74%, 95.32%, 99.22%, and 99.46%, respectively. Moreover, the VO demonstrated a potent effect against methicillin-resistant Staphylococcus aureus (MRSA) (MIC = 0.33 ± 0.1 µL/mL) and showed effective antimicrobial activity against Proteus vulgaris (MIC = 10 ± 3.6 µL/mL). Interestingly, the VO showed a MIC value of 0.2 µL/mL against the Candida albicans isolate. In conclusion, the extracted VO showed mild cytotoxic effects, promising antibacterial and antifungal effects, especially against MRSA, P. vulgaris, and C. albicans. Further, in vivo research and clinical trials are needed to validate the safety and efficacy of S. palaestina VO for potential therapeutic applications and to develop practical applications in medicine and healthcare.