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Lignocellulosic biomass generated from different sectors (agriculture, forestry, industrial) act as biorefinery precursor for production of second-generation (2G) bioethanol and other biochemicals. The integration of various conversion techniques on a single platform under biorefinery approach for production of biofuel and industrially important chemicals from LCB is gaining interest worldwide. The waste generated on utilization of bio-resources is almost negligible or zero in a biorefinery along with reduced greenhouse gas emissions, which supports the circular bioeconomy concept. The economic viability of a lignocellulosic biorefinery depends upon the efficient utilization of three major components of LCB—cellulose, hemicellulose and lignin. The heterogeneous structure and recalcitrant nature of LCB is main obstacle in its valorization into bioethanol and other value-added products. The success of bioconversion process depends upon methods used during pre-treatment, hydrolysis and fermentation processes. The cost involved in each step of the bioconversion process affects the viability of cellulosic ethanol. The lignocellulose biorefinery has ample scope, but much-focused research is required to fully utilize major parts of lignocellulosic biomass with zero wastage. The present review entails lignocellulosic biomass valorization for ethanol production, along with different steps involved in its production. Various value-added products produced from LCB components were also discussed. Recent technological advances and significant challenges in bioethanol production are also highlighted in addition to future perspectives. Graphical abstract