Palm oil, the main vegetable oil produced globally, serves diverse purposes, ranging from cooking to the production of processed foods, cosmetics, and biodiesel. Despite contributing significantly to the economies of major producing nations, the escalating production of palm oil raises serious environmental concerns, including deforestation, biodiversity loss, and various forms of pollution. Palm oil mill effluent (POME), a byproduct of palm oil extraction, poses a severe environmental threat when left untreated. As an eco-friendly alternative, anaerobic digestion in controlled bioreactors has emerged, offering simultaneous POME treatment and biofuel generation, particularly hydrogen, with high energy efficiency. This review explores the challenges and opportunities associated with biohydrogen production from POME. Key considerations involve optimizing parameters through pretreatments, nanoparticle incorporation, defining optimal bioreactor conditions, determining hydraulic retention times, and integrating multi-stage processes like dark fermentation followed by photofermentation. This review also emphasizes the significance of sustainable practices and economic analyses in shaping the future of hydrogen production from POME, positioning it as a pivotal player in the palm oil industry’s circular economy and the global energy transition.