Capacitive Deionization (CDI) has emerged as a promising and environmentally sound solution for addressing pressing water treatment challenges. This critical review meticulously examines the design, operational considerations, and performance metrics of CDI systems, particularly highlighting their significance in environmental applications under real-world conditions for handling different water sources such as groundwater, surface water, sea water. Various CDI configurations, electrode materials, and operational parameters are scrutinized through an extensive analysis of literature, with their direct influence on system efficiency, ion removal capacities, and long-term stability being elucidated. The reduced energy consumption, minimal chemical usage, and potential for sustainable water treatment of CDI, as compared to traditional methods, are emphasized from an environmental perspective. Moreover, this review underscores the pivotal role of CDI in practical environmental applications, including desalination, wastewater treatment, and remediation of inorganic pollutants (heavy metals and hardness) and resource recovery (nutrient, uranium, lithium…). By presenting compelling case studies, CDI's efficacy in mitigating environmental impacts is illustrated, offering a cleaner and more cost-effective alternative to conventional treatment methods. By outlining challenges and charting future directions, this review serves as a roadmap for researchers, engineers, and policymakers, facilitating the development of sustainable and efficient water treatment strategies. In an era marked by escalating environmental concerns, CDI emerges as a potential technology for responsible and effective water management, poised to shape a more sustainable future.