Biofuel, an inexhaustible fuel source, plays a pivotal role in the contemporary era by diminishing the dependence on non-renewable energy sources and facilitating the mitigation of CO2 emissions. Due to the many constraints in existing technology and the resulting increased costs, the production of biofuels on a large scale is a laborious process. Furthermore, the methods used to convert varied feedstock into the intended biofuel may vary based on the specific techniques and materials involved. The demand for bioethanol is increasing worldwide due to the implementation of regulations by world nations that mandates the blending of bioethanol with petrol. In this regard, second-generation bioethanol made from lignocellulosic biomass is emerging at a rapid rate. Pre-treatment, hydrolysis, and fermentation are some of the technical, practical, and economic hurdles that the biochemical conversion method must overcome. Nanoparticles (NPs) provide a very effective approach to address the present obstacles in using biomass, due to their selectivity, energy efficiency, and time management capabilities, while also reducing costs. NPs smaller dimensions allow them to be more effective at interacting with lignocellulosic components at low concentrations to release carbohydrates that can be utilized to produce bioethanol. This article provides a concise overview of various biofuels and the nanotechnological advancements in producing it, with a particular emphasis on ethanol. It provides a detailed discussion on the application of nanotechnology at each stage of ethanol production, with a particular emphasis on understanding the mechanism of how nanoparticles interact with lignocellulose.