Growing energy demand cannot be met by nonrenewable fossil fuels. Consequently, alternative energy sources are being intensively pursued. Cellulose, a very stable carbohydrate that makes up plant cell walls, is a potential source of renewable fuels. Transforming cellulose into liquid fuels, however, requires substantial chemical and biological processing, first to extract the sugars that comprise the cellulose and then to convert those sugars into fuels. These requirements pose major hurdles to sustainable biofuels production, but overcoming them may be possible by engineering new plants that facilitate the extraction and conversion of their cell walls into liquid fuels. Similarly, newly designed microbes capable of metabolizing plant cell wall components can simplify biomass processing for fuel conversion. Other microorganisms such as microalgae and cyanobacteria can be redesigned to incorporate new functionalities. For example, these photosynthetic organisms, which capture light and convert it into chemical energy, can be re-engineered to produce biofuels, including biodiesel, directly from sunlight. Technological advances enabling the design of new biological systems are already moving biofuels closer to becoming viable, alternative renewable energy resources. Further advances are necessary for developing useful bioenergy crops that not only allow facile conversion of biomass into biofuels, but also do not compete with food crops for arable land. In other words, crops must be rationally redesigned to produce high biomass yields on marginal agricultural lands and under changing weather conditions.