Abstract: Magnetic reconnection, a ubiquitous plasma process in the universe, serves as a key mechanism for explosive energy release in various astrophysical phenomena. It facilitates the rapid conversion of stored magnetic energy into kinetic energy and thermal energy of particles while simultaneously altering magnetic field topologies. Unlike Earth, Mars does not possess a global intrinsic magnetosphere; instead, it features localized crustal magnetic fields, particularly strong in the southern hemisphere. This configuration allows the solar wind to interact directly with the Martian ionosphere through processes like mass loading and ion pickup, forming an induced magnetosphere comprising structures such as the bow shock, magnetosheath, induced magnetopause, and magnetotail. The interplanetary magnetic field (IMF) can readily penetrate the relatively weak Martian ionosphere, and the extension of its crustal fields to high altitudes results in a highly complex magnetic topology, akin to that of the solar corona, creating ideal conditions for magnetic reconnection to occur. Moreover, the Martian ionosphere contains multiple ion species, including \mathrmO_2^+ , O⁺, and \mathrmCO_2^+ , alongside collisional effects in certain regions, which impart unique characteristics to reconnection events, diverging markedly from the standard collisionless proton-electron reconnection models prevalent in other space environments. This review provides a comprehensive synthesis of observational, theoretical, and numerical advancements in understanding magnetic reconnection within the Martian space environment. We examine reconnection phenomena across key regions: the induced magnetopause/ionopause, the ionosphere interior, the magnetotail, and the magnetosheath. Observations from missions like the Mars Atmosphere and Volatile EvolutioN (MAVEN) and Tianwen-1 have revealed diverse reconnection signatures, including Hall magnetic fields, high-speed ion jets, ion heating, and topological changes. For instance, at the induced magnetopause, reconnection between draped IMF and anchored ionospheric fields generates sunward jets that drive significant ion escape, with local rates up to 1.0 × 10²⁴ s⁻¹. In the magnetotail, reconnection events, often in the −E hemisphere, exhibit mass-dependent ion outflows and contribute to bursty oxygen ion escapes, with rates temporarily reaching global levels like 2.4 × 10²⁴ s⁻¹. Within the ionosphere, particularly over strong crustal fields, reconnection between various topologies, such as open-open or draped-closed field lines, produces localized accelerations and contributes to phenomena like interloop reconnection and electron flux enhancements. A focal point of this review is the ionospheric mass ejection (IME) triggered by magnetic reconnection, a newly identified process analogous to solar coronal mass ejections (CMEs). In low-beta regions of the ionosphere, reconnection between oppositely directed open field lines ejects plasma cavities with densities dropping by orders of magnitude, accompanied by outflows exceeding Mars' escape velocity (~5 km/s). Analysis of MAVEN data indicates IME events occur approximately three times per Martian day, each ejecting about 1.3 kg of oxygen ions, cumulatively accounting for an estimated 0.046 mm global equivalent water layer loss over 4.2 billion years. While this contribution appears modest under current conditions, it likely amplified during the early solar system when solar wind densities and magnetic fields were stronger, enhancing atmospheric erosion. Theoretically, we introduce the multi-fluid generalized Ohm's law tailored for multi-ion species reconnection, extending beyond traditional two-fluid models. By nondimensionalizing the equations, we derive inertial lengths for heavy and light ions, revealing stepwise decoupling processes that form multi-scale diffusion regions and modify Hall effects, outflow structures, and dimensionless reconnection rates. Effective mass interpretations explain deviations in inertial scales compared to proton-electron cases, with heavy ions exhibiting larger scales due to outward electric fields from lighter ions. We also discuss collisional influences, which broaden diffusion regions and reduce reconnection efficiency at lower altitudes (<300 km), potentially leading to partially collisional regimes involving ion-neutral or ion-ion interactions. These studies not only elucidate energy conversion mechanisms driving Martian atmospheric and water escape, a critical factor in the planet's climate evolution and habitability but also advance fundamental reconnection theory. Future multi-point observations from MAVEN and Tianwen-1, coupled with analogies to solar coronal physics, promise deeper insights into this natural laboratory for plasma processes.