The world’s energy sector has undergone drastic changes in the last decades due to the climate change and the turn to renewable energy sources. Biomass is the largest renewable source of carbohydrates on the Earth and is an important substrate for biofuel production. Saccharomyces cerevisiae yeasts are the main producer of first-generation ethanol from corn and sugarcane. However, these yeasts lack the ability to utilize the important components of lignocelluloses such as pentoses D-xylose and L-arabinose. Pentose-fermenting yeasts could become an alternative to S. cerevisiae in ethanol production from lignocelluloses. This review focuses on the ecology, geographical distribution, taxonomy, and potential applications of naturally-occurring pentose-fermenting yeasts. Pentose-fermenting yeasts have been frequently found in the lignocelluloseassociated substrates. Decaying and rotten wood and the gut of wood-boring insects are especially important natural reservoirs of this group of yeasts. Simple sugars xylose and L-arabinose would be present in such habitats as suitable nutrients for pentose-assimilating yeasts. The other natural habitats reported for pentose-fermenting yeasts are soil, plants, and herbivore faeces. Pentose-fermenting yeasts are found in many geographical regions and have been isolated on almost each continent. Dozens of novel pentose-fermenting yeast species have been discovered in the last decade. The previously poorly explored regions, including Brazil, China, and several Asian countries were especially oft en reported as sites of isolation of such yeasts. Most xylose-fermenting yeasts belong to genera Scheffersomyces, Candida, Spathaspora, Sugiyamaella, and Pachysolen, while the most efficient ethanol producers are represented by species Scheffersomyces stipitis and Spathaspora passalidarum. The vast majority of research on the biotechnological application of pentose-fermenting yeasts focuses on their role in the production of bioethanol from lignocellulose. This group of yeasts could be either directly involved in the fermentation stage of ethanol production or serve as a source of genetic material for the genetic manipulation of other industrial yeast strains. Pentose-fermenting yeasts could also be involved in the production of various chemicals from lignocellulosic substrates, mainly polyols, xylitol, and arabitol. Thus, the search for novel pentose-fermenting yeasts that could become new efficient ethanol producers or donors of new genetic material is still ongoing. The previously unexplored or poorly studied geographical regions and natural habitats can hide many novel yeasts with huge biotechnological potential.