Onion skin waste (OSW), the primary non-edible byproduct from onion processing, offers a renewable source of bioactive compounds. This study aims to valorize OSW through subcritical water extraction (SWE), aligning with circular economy and biorefinery principles. SWE was carried out at 145 °C, 50 bar and 50 min in a discontinuous reactor, producing a phenolic-rich extract (32 ± 3 mg/g), dominated by protocatechuic acid (20 ± 3 mg/g), quercetin-4´-O-glucoside (7.5 ± 0.2 mg/g), and quercetin (3.2 ± 0.6 mg/g). Additionally, it contains sugars (207 ± 20 mg sucrose-Eq/g), proteins (22.8 ± 1.6 mg BSA-Eq/g) and free amino acids (20.4 ± 1.2 mg arginine-Eq/g). Its phenolic richness determines its scavenging activity against ●NO and O2●- radicals, and its α-glucosidase and aldose-reductase inhibition without affecting α-amylase. Notably, the extract demonstrates significant α-glucosidase inhibition (IC50 = 76 ± 4 µg/mL), surpassing acarbose (IC50 = 129.5 ± 1.0 µg/mL), in both pure enzyme and cell culture tests without showing cytotoxicity on AGS, HepG2 and Caco-2 human cell lines. The extract’s bioactivity and nutritional content make it suitable for developing antioxidant and antidiabetic nutraceutical/food components, highlighting the SWE potential for OSW valorization without using organic solvents.