Cyanobacteria are photoautotrophic prokaryotes that perform oxygenic photosynthesis through photo oxidation of water. They have been widely used as model organisms for studying photosynthesis. In recent decades, photosynthetic organisms, including cyanobacteria, have been chosen as potential hosts for biofuel production due to their remarkable ability to convert carbon dioxide into biofuel without the input of an external energy source. Biofuel, an excellent substitute for fossil fuels, have received a lot of attention due to their eco-friendly properties. Cyanobacteria have emerged as one of the leading potential candidates for biofuel production due to their superior growth rate over other photosynthetic organisms employed in biofuel production and the presence of a significant amount of lipids (over 50% of dry cell weight) in the cells. Furthermore, they have higher photosynthetic efficiency, especially in CO₂-rich environments, making them more desirable. In addition, their inherent ability to uptake exogenous deoxyribonucleic acid (DNA) in conjunction with homologous recombination makes them ideal candidates for transformation into photosynthetic cell factories to produce biofuels. The genetic and metabolic modifications have successfully enabled biofuel production in cyanobacteria; however, major challenges such as energy-intensive downstream processing, low yield, slow growth, and cytotoxicity are impeding its scale-up. This review discusses the production of various types of biofuels in cyanobacteria, as well as the current state of global biofuel production. It also emphasizes the major challenges in biofuel production and strategies for overcoming them.