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Increasing energy demand, environmental pollution, and soaring CO2 emissions necessitate the exploitation of renewable sources of energy. Lignocellulosic biomass is a naturally abundant resource that can be considered as one of the promising environment-friendly renewable energy options. Biochar is a carbon-rich, porous solid produced by the thermal decomposition of biomass under anoxic conditions and at moderate temperatures; it is suitable for soil remediation and with some functionalization can be converted into functional materials, finding applications in catalysis for biofuel production. Biochar can be produced on a scale ranging from large industrial facilities to individual farms since it is a solid residue formed in the pyrolysis of biomass. How to use it effectively is a critical question for improving economic viability and environmental sustainability of biomass conversion technologies. Biochar production and applications for soil remediation and pollutant removal has been discussed and reviewed extensively. However, there are limited critical reviews on the biochar formation mechanism, functionalization of biochar materials for catalysis and biofuel production applications. Therefore, this study reviewed the current literature on the activities and advantages of biochar derived materials used in biofuel production. The preparation methods and prevailing reaction conditions affecting the catalytic activity of the biochar derived material along with their reusability aspect are discussed in this review.