The utilization of lignin for fungible fuels and products represents one of the most imminent challenges in the modern biorefinery because most of the bioprocesses for lignocellulosic biofuels results in a lignin-containing waste stream. Considering lignin's abundance and relatively high energy content, this waste stream can be used as a feedstock for value-added products to improve the sustainability and economic feasibility of the biorefinery. Bioconversion of lignin with microbes recently emerged as an alternative lignin-valorization approach with significant potential. Typically, the microbial bioconversion of lignin requires three major steps: lignin depolymerization, aromatic compounds catabolism, and target product biosynthesis. In this review, we summarize the most recent advances in lignin bioconversion to address the challenges in each of the three steps. In conclusion, we further discuss strategies and perspectives for future research to address the challenges in bioconversion of lignin.