High-performance carbon fibers (CFs) are currently produced primarily from polyacrylonitrile (PAN). However, the high cost of such CFs and the environmental concerns during its manufacturing (from PAN) are stimulating research on alternative biobased precursors and environmentally friendly processing routes. This review summarizes the recent research studies on the pathways for converting cellulose and lignin (most abundant and renewable biomass) into suitable precursor fibers and CFs. The role of various bio-based precursors, fiber spinning routes, and process conditions on the final properties of CFs is discussed. Although bio-based CFs reported in the current research studies have limited strength and modulus to be considered for high-performance aerospace applications, further progress in precursor purification and optimized fiber processing may lead to their application in less demanding structural applications such as automotive and industrial. Even in their current state, a lack of graphitic crystallinity results in a lower conductivity for the resulting CFs and makes them suitable for ultrahigh temperature insulative applications. Furthermore, the noncrystalline form of carbon obtained from bio-based precursors clearly indicates a significant potential of carbon nanofibers, mats, and activated CFs in nonstructural applications that require a large specific surface area, such as electrochemical energy storage and purification.