Real-time drilling analysis requires knowledge of lithology at the drill bit. However, logging-while-drilling (LWD) sensors in the bottom hole assembly (BHA) are usually positioned 2–50 m (7–164 ft) above the bit (called the sensor offset), leading to a delay in real-time drilling analysis. The current industry solution to overcome this delay involves stopping drilling to perform a bottoms-up circulation for cuttings evaluation—a process that is both time-consuming and costly. To address this issue, our study evaluates three methodologies for real-time lithology prediction at the bit using drilling and petrophysical parameters. The first method employs a petrophysical approach, which involves using bulk density and neutron porosity predicted at the bit. The second method combines unsupervised and supervised machine learning (ML) for prediction. The third method employs classification algorithms on manually labeled lithology data from mud log reports, a novel approach used in this work. Our results show varying degrees of success: the bulk density versus neutron porosity cross-plot method achieved an accuracy of 58% with blind-well test data; the ML approach improved accuracy to 66%; and the Random Forest (RF) classification with manual labeling significantly increased accuracy to 86%. This comparative analysis of three different methodologies for lithology prediction has not been previously explored in the literature. While clustering and classification methods have been regarded as the most effective, our study demonstrates that they do not always yield the best result. These findings demonstrate that ML models, particularly the manual labeling approach, substantially outperform the petrophysical method. This new algorithm, designed for real-time applications, uses selected input parameters to effectively minimize problems associated with the sensor offset of LWD tools. It rapidly adapts to changes, offering a quicker and more cost-effective interpretation of lithology. This eliminates the need for time-consuming bottoms-up circulation to evaluate cuttings. Ultimately, this approach enhances drilling efficiency and significantly improves the accuracy of lithology prediction, notably in identifying interbedded geological layers.