Bio-oil produced from the fast pyrolysis/hydrothermal liquefaction is gaining popularity worldwide as the forerunner to replace fossil fuel. The bio-oil can be produced from agricultural waste, forest residue, and urban organic waste. It is also called pyrolysis oil, renewable fuel, and has the potential to be used as fuel in many applications. The application of bio-oil as transportation fuel helps to reduce the emission of greenhouse gases and to keep up the ecological balance. The bio-oil has the heating value of nearly half of the diesel fuel i.e. 16-19 MJ/kg; but, the inferior properties such as high water content, high viscosity, low pH, and poor stability hinder bio-oil application as a fuel. Thus, this paper provides a detailed review of bio-oil properties, its limitations and focuses on the recent development of different upgrading and separation techniques, used to date for the improvement of the bio-oil quality. Furthermore, the advantages and disadvantages of each upgrading method along with the application and environmental impact of bio-oil are also discussed in this article.