Lignin is an abundant renewable natural biopolymer. Moreover, a significant development in lignin pretreatment and processing technologies has opened a new window to explore lignin and lignin-based bionanomaterials. In the last decade, lignin has been widely explored in different applications such as drug and gene delivery, tissue engineering, food science, water purification, biofuels, environmental, pharmaceuticals, nutraceutical, catalysis, and other interesting low-value-added energy applications. The complex nature and antioxidant, antimicrobial, and biocompatibility of lignin attracted its use in various biomedical applications because of ease of functionalization, availability of diverse functional sites, tunable physicochemical and mechanical properties. In addition to it, its diverse properties such as reactivity towards oxygen radical, metal chelation, renewable nature, biodegradability, favorable interaction with cells, nature to mimic the extracellular environment, and ease of nanoparticles preparation make it a very interesting material for biomedical use. Tremendous progress has been made in drug delivery and tissue engineering in recent years. However, still, it remains challenging to identify an ideal and compatible nanomaterial for biomedical applications. In this review, recent progress of lignin towards biomedical applications especially in drug delivery and in tissue engineering along with challenges, future possibilities have been comprehensively reviewed.