Used in dermatology for the treatment of alopecia areata, squaric acid acts as an immunomodulator by inducing contact hypersensitivity. It is applied topically to the scalp to stimulate an immune response that can promote hair regrowth in affected areas. The compound is also utilized in organic synthesis as a building block for creating functionalized materials due to its unique quadrupolar structure and reactivity. Additionally, it has been explored in research for its potential in developing sensors and conductive polymers owing to its electronic properties.