Organizational reputation is a valuable intangible asset that is pivotal for the government to garner widespread public support and effectively respond to external shocks. Research on organizational reputation, emphasizing the relationship between the government and the public, can provide new ideas for efficient government governance, and has become a cutting-edge field of international public management in recent years. Despite a constant upsurge in research findings on organizational reputation in the public sector over the past decades, most studies merely accentuate reputation mechanisms at the organizational level, neglecting the subjective perception factors of the audience as well as the interactive relationship between the organization and the audience. Consequently, unlike previous reputation reviews that focus on organizational level, this study focuses on the audience for reputation literature review. Firstly, this study reviews Carpenter’s Bureaucratic Reputation Theory, pointing out the main theoretical viewpoints on understanding the reputation of public sector organizations from the perspectives of political science and organizational science. Subsequently, based on the holistic perspective of organization, audience, and interaction between the two, this study systematically analyzes the “construction-reshaping-perception” mechanism of organizational reputation in the public sector. Lastly, the policy implications of organizational reputation theory for public management practices are posited, and three key directions for future research are provided: the construction of organizational reputation within a normalized context, the impact of leaders and interactive relationships on organizational reputation, and the disparity between organizational reputation construction and public reputation perception. This study enriches the organizational reputation theory, and provides reference for reputation management practices and government innovation governance.