The power conversion efficiency (PCE) of single-junction perovskite solar cells (PSCs) has reached 26.1% in small-scale devices. However, defects at the bulk, surface, grain boundaries, and interfaces act as non-radiative recombination centers for photogenerated electron-hole pairs, limiting the open-circuit voltage and PCE below the Shockley–Queisser limit. These defect states also induce ion migration towards interfaces and contribute to intrinsic instability in PSCs, reducing the quasi-Fermi level splitting and causing anomalous hysteresis in the device. The influence of defects becomes more prominent in large-area devices, demonstrating much lower PCE than the lab-scale devices. Therefore, commercializing PSCs faces a big challenge in terms of rapid decline in working performance due to these intrinsic structural defects. This paper provides a comprehensive review of recent advances in understanding the nature and the classification of defects, their impact on voltage losses, device parameters, intrinsic stability, and defect quantification and characterization techniques. Novel defect passivation techniques such as compositional engineering, additive engineering, post-treatments, dimensionality engineering, and interlayer engineering are also reviewed, along with the improvements in PCE and stability based on these techniques for both small-area devices and large-area roll-to-roll coated devices.