The demand for bioenergy is increasing due to the diminishing popularity of fossil fuels and rising greenhouse gas emissions. However, according to recent reports, renewable energy sources account for only 14% of the total primary energy supply, of which bioenergy accounts for 67%. Densification of biomass offers a sustainable pathway to generate solid fuels, which can replace coal while liberating bioenergy, reducing carbon emissions and valorizing organic wastes. Because of the rising demand for fuel pellets, there has been an increased interest in utilizing a wider range of biomass resources. Density, mechanical stability, hydrophobicity and energy content are the major properties controlling the quality of fuel pellets. These properties are influenced by biomass type, pretreatments, formulations such as binders, additives and lubricants, densification methods and conditions including temperature, pressure and relaxation time. Here we review biomass densification, mechanisms, factors affecting the pelletization process and pellet quality, and characterization techniques to access the fuel quality of pellets. Furthermore, we present additives, binders and lubricants used for the pelletization of a wide variety of biomass. This review also identifies the major applications for fuel pellets.