Lignin is a versatile biomass that possesses many different desirable properties such as antioxidant, antibacterial, anti-UV, and good biocompatibility. Natural lignin can be processed through several chemical processes. The processed lignin can be modified into functionalized lignin through chemical modifications to develop and enhance biomaterials. Thus, lignin is one of the prime candidate for various biomaterial applications such as drug and gene delivery, biosensors, bioimaging, 3D printing, tissue engineering, and dietary supplement additive. This review presents the potential of developing and utilizing lignin in the outlook of new and sustainable biomaterials. Thereafter, we also discuss on the challenges and outlook of utilizing lignin as a biomaterial.