Biomass gasification is a promising technology for the transformation of biomass into a gaseous product. However, it suffers from a major drawback of tar generation which affects the downstream application and operation to a larger extent becoming a big hurdle in the commercialization of the technology. Catalytic tar reduction by using a different catalyst as the in situ mode or as a secondary catalyst is an attractive technique to achieve a clean and tar-free gaseous product. Besides this, catalysts are used for altering the gas distribution as per the requirement for a specific application like FT synthesis or methanol synthesis. However, few shortcomings persist in using a different type of catalyst and their economic viability; there is a need to develop low cost and effective catalysts. The present paper provides a review on the role of catalysts in biomass gasification and tar reduction, and different catalysts used in biomass gasification. The paper discusses the challenges and prospects for developing the novel catalyst.