Currently, the pulp and paper industry generates around 50–70 million tons of lignin annually, which is mainly burned for energy recovery. Lignin, being a natural aromatic polymer rich in functional hydroxyl groups, has been drawing the interest of academia and industry for its valorization, especially for the development of polymeric materials. Among the different types of polymers that can be derived from lignin, polyurethanes (PUs) are amid the most important ones, especially due to their wide range of applications. This review encompasses available technologies to isolate lignin from pulping processes, the main approaches to convert solid lignin into a liquid polyol to produce bio-based polyurethanes, the challenges involving its characterization, and the current technology assessment. Despite the fact that PUs derived from bio-based polyols, such as lignin, are important in contributing to the circular economy, the use of isocyanate is a major environmental hot spot. Therefore, the main strategies that have been used to replace isocyanates to produce non-isocyanate polyurethanes (NIPUs) derived from lignin are also discussed.