Crop residues, the byproduct of crop production, are valuable natural resources that can be managed to maximize different input use efficiencies. Crop residue management is a well-known and widely accepted practice, and is a key component of conservation agriculture. The rapid shift from conventional agriculture to input-intensive modern agricultural practices often leads to an increase in the production of crop residues. Growing more food for an ever-increasing population brings the chance of fast residue generation. Ecosystem services from crop residues improve soil health status and supplement necessary elements in plants. However, this is just one side of the shield. Indecorous crop residue management, including in-situ residue burning, often causes serious environmental hazards. This happens to be one of the most serious environmental hazard issues witnessed by the agricultural sector. Moreover, improper management of these residues often restrains them from imparting their beneficial effects. In this paper, we have reviewed all recent findings to understand and summarize the different aspects of crop residue management, like the impact of the residues on crop and soil health, natural resource recycling, and strategies related to residue retention in farming systems, which are linked to the environment and ecology. This comprehensive review paper may be helpful for different stakeholders to formulate suitable residue management techniques that will fit well under existing farming system practices without compromising the systems’ productivity and environmental sustainability.