Lignin is the most prevalent by-product of the pulp and paper industry and the world's second most abundant naturally occurring renewable biopolymer, after cellulose. Among various lignin-based materials, lignin nanoparticles (LNPs) are inexpensive and easily biodegradable by fungi and bacteria in nature, considered as a valuable class of renewable resources. Additionally, LNPs are not biotoxic and do not cause tissue rejection. Recent studies have shown that LNPs exhibit bright and promising applications in biocatalysts, energy storage devices, drug and tissue engineering, and hybrid nanocomposites. These nanoparticles can be synthesized from different lignin by utilizing various chemical, physical, and biological processes, resulting in diverse morphology, shape, size, yield, and stability. The purpose of this review is to discuss the current state of lignin-based nanoparticles, with an emphasis on their viability and commercialization. To understand the concept, mechanism of formation, synthesis techniques, and applications, as well as future perspectives and challenges.