Lignocellulosic bioethanol is a promising renewable energy source that can reduce greenhouse gas emissions and improve energy security. However, its commercialization faces significant economic and environmental challenges, including high feedstock costs, complex pretreatment processes, expensive enzyme formulations, and substantial energy and water requirements. This review examines the key factors affecting its viability, including feedstock costs, enzyme efficiency, co-product generation, greenhouse gas emissions, water use, energy efficiency, and land use impacts. Recent advancements in pretreatment technologies, enzyme recycling, genetically engineered microbial strains, and fermentation strategies are discussed for their potential to improve process efficiency and reduce production costs. This review also explores co-product valorization, including lignin and biogas utilization, which can enhance the economic sustainability of bioethanol production by generating additional revenue streams, offsetting operational costs, and improving overall process efficiency. Identifying research gaps, it highlights the need for cost-effective feedstock supply chains, advanced enzyme technologies, and optimized fermentation methods. Additionally, the role of life cycle assessments and government policies, including subsidies, is considered in shaping production costs and the environmental impact. By integrating economic and environmental perspectives, this review provides insights into advancing the sustainable production of lignocellulosic bioethanol, emphasizing the importance of continued innovation to overcome existing challenges.