The more I think about the terms "living, breathing world" the more it has to be Kingdom Come 2. There are just too many things that it does that no other game does and that makes it feel lived in. Small things like NPCs talking off their stuff when the go to bed and putting it in locked chests. If you steal it they won't have anything to wear the next morning. Other characters will constantly remark on whether or not you've bath, will react you differently based on how you are dress, notice when you've been fighting, can smell you, which effects your sneaking.
It has the usual NPC routines, but it also has dynamic conversations between NPCs that will actually change as you do different actions throughout your playthrough. After skirmishes, when people die, people will come out and pray over the dead bodies, or search them for clues to see who killed them. If you drop items on the ground, NPCs that come across them will pick them up, talk about them, and you'll possibly see them wearing them later. Quests actually have in game time. If someone says to meet you tomorrow morning and you don't show up on time, they'll wait a bit and then go do it without you, and it happens in real time and changes how the quests play out.
You can poison food from your inventory, give it to someone and kill them, or better yet, sneak into a bandit camp, poison their cooking pot and watch them eat and die. I watched a video of a guy who dug a hole and 10 hours later came across an NPC who wanted a hole dug, and because he had already done all of the quest dialogue changed and played out differently. And all of that doesn't include the usual staples like food going bad, sleeping or passing out from not sleeping, eating, overeating and getting sick, getting drunk, hangovers, reputations, a criminal system, etc. It literally has it all, it's Oblivion on steroids.
There are lot of open worlds that, on a surface level, are very immersive, games like The Witcher 3 or Red Dead Redemption 2, or Skyrim, but I can't think of any that are as interactive as KCD2 and I think it's the benchmark going forward for these types of games.
