Lignocellulose, the most abundant and renewable plant resource, is a complex of polymers mainly composed of polysaccharides (cellulose and hemicelluloses) and an aromatic polymer (lignin). Utilisation of lignocellulosic biomass for biotechnological applications has increased over the past few years. Xylan is the second most abundant carbohydrate in plant cell walls, and structurally, it is a heteropolysaccharide with a backbone composed of β-1,4-d-xylopyranosyl units connected with glycosidic bonds. Xylanases degrade this complex structure of xylan and can be produced by various microorganisms, including fungi, bacteria, and yeasts. Lignocellulosic biomass is the most economical substrate for the production of fungal xylanases. The bioconversion of lignocellulosic biomass to industrially important products, i.e., xylooligosaccharides and biofuels, is possible via the application of xylanases. These enzymes also play a key role in enhancing the nutrition of food and feed and the bio-bleaching of paper and kraft pulp. However, the demand for more potent and efficient xylanases with high activity has increased, which is fulfilled by involving recombinant DNA technology. Hence, in this review, we thoroughly discussed the biotechnological potential of lignocellulosic biomass for the production of fungal xylanases, their purification, molecular strategies for improving their efficiency, and their utilisation for the production of valuable products and in other industrial processes.