Production of biofuel from Lignocellulosic biomass (LCB) reduces the energy dependency on fossil fuels. The process of manufacture does not have any adverse environmental impact. LCB is an abundant and promising renewable resource for long term biofuel supply. Bioethanol derived from LCB has the potential to meet the current energy demand, reduces greenhouse gases and supports rural economy. Cellulosic ethanol is one of the viable energy sources and therefore, it is considered as an alternative fuel. A lot of efforts have been made in the last decades on production of ethanol from cellulosic source as cost competitive with conventional fossil fuel. The production of bioethanol involves three steps: pretreatment, hydrolysis and fermentation. Pretreatment of LCB is usually done following physical, chemical or physicochemical process. Hydrolysis is carried out either chemically or enzymatically followed by microbial fermentation. However, involvement of costly equipment, high energy consumption and generation of toxic substances need to be evaluated. This drives the attention of scholars in the field towards alternative option for the development and optimization of biological methods of pretreatment, hydrolysis and fermentation. In this review we focus on recent developments of biological methods of pretreatment, hydrolysis and fermentation with respect to their advantages and limitations.