With world energy consumption predicted to increase 54% between 2001 and 2025, primary attention has been directed towards the development of carbon neutral energy and sustainable sources to meet the future needs. Reductions of fossil fuels, environmental deterioration, and fluctuating prices of traditional fuels have revived an interest in the development of renewable fuels. Concerns regarding greenhouse gas emission, energy scarcity and the desire for energy independence are increasing the pace and intensity of biofuel research and commercialization. Biofuels are an attractive substitute to current petroleum based fuels because they can be utilized as transportation fuels with diminutive change to current technologies; they also have significant potential to improve sustainability and reduce greenhouse gas emissions. Liquid (i.e., ethanol, butanol, biodiesel) or gaseous (i.e., methane or hydrogen) biofuels are generally produced from organic materials such as starch, oilseeds and animal fats or cellulose and agricultural biomass. Considering all recent technologies in microbial physiology, strain development, fermentation and low-energy fuel separation, biobutanol is the new generation of green biofuel that is cost-effective, burns clean, and enhances environmental sustainability. Whether it will be used as a standalone transportation fuel, an additive to gasoline or diesel fuel, or an additive to improve the properties of ethanol.