Global energy-related emissions, in particular carbon dioxide, are rapidly increasing. Without immediate and strong reductions across all sectors, limiting global warming to 1.5 °C and thus mitigating climate change is beyond reach. In addition to the expansion of renewable energies and the increase in energy efficiency, the so-called Carbon Capture and Utilization technologies represent an innovative approach for closing the carbon cycle and establishing a circular economy. One option is to combine CO2 capture with microbial C1 fermentation. C1-molecules, such as methanol or formate are considered as attractive alternative feedstock for biotechnological processes due to their sustainable production using only CO2, water and renewable energy. Native methylotrophic microorganisms can utilize these feedstock for the production of value-added compounds. Currently, constraints exist regarding the understanding of methylotrophic metabolism and the available genetic engineering tools are limited. For this reason, the development of synthetic methylotrophic cell factories based on the integration of natural or artificial methanol assimilation pathways in biotechnologically relevant microorganisms is receiving special attention. Yeasts like Saccharomyces cerevisiae and Yarrowia lipolytica are capable of producing important products from sugar-based feedstock and the switch to produce these in the future from methanol is important in order to realize a CO2-based economy that is independent from land use. Here, we review historical biotechnological applications, the metabolism and the characteristics of methylotrophic yeasts. Various studies demonstrated the production of a broad set of promising products from fine chemicals to bulk chemicals by applying methylotrophic yeasts. Regarding synthetic methylotrophy, the deep understanding of the methylotrophic metabolism serves as the basis for microbial strain engineering and paves the way towards a CO2-based circular bioeconomy. We highlight design aspects of synthetic methylotrophy and discuss the resulting chances and challenges using non-conventional yeasts as host organisms. We conclude that the road towards synthetic methylotrophic yeasts can only be achieved through a combination of methods (e.g., metabolic engineering and adaptive laboratory evolution). Furthermore, we presume that the installation of metabolic regeneration cycles such as supporting carbon re-entry towards the pentose phosphate pathway from C1-metabolism is a pivotal target for synthetic methylotrophy.