Regarding the limited resources for fossil fuels and increasing global energy demands, greenhouse gas emissions, and climate change, there is a need to find alternative energy sources that are sustainable, environmentally friendly, renewable, and economically viable. In the last several decades, interest in second-generation bioethanol production from non-food lignocellulosic biomass in the form of organic residues rapidly increased because of its abundance, renewability, and low cost. Bioethanol production fits into the strategy of a circular economy and zero waste plans, and using ethanol as an alternative fuel gives the world economy a chance to become independent of the petrochemical industry, providing energy security and environmental safety. However, the conversion of biomass into ethanol is a challenging and multi-stage process because of the variation in the biochemical composition of biomass and the recalcitrance of lignin, the aromatic component of lignocellulose. Therefore, the commercial production of cellulosic ethanol has not yet become well-received commercially, being hampered by high research and production costs, and substantial effort is needed to make it more widespread and profitable. This review summarises the state of the art in bioethanol production from lignocellulosic biomass, highlights the most challenging steps of the process, including pretreatment stages required to fragment biomass components and further enzymatic hydrolysis and fermentation, presents the most recent technological advances to overcome the challenges and high costs, and discusses future perspectives of second-generation biorefineries.