Lyocell fiber has emerged as an important class of regenerated cellulose that is produced based on the N-methyl morpholine-N-oxide (NMMO) dissolution method, and it has unique properties compared to viscose fiber. The NMMO technology provides a simple, resource-conserving, and environmentally friendly method for producing regenerated cellulose fiber. In this paper, the manufacturing process, environmental impact, and product quality of lyocell fiber are reviewed and compared with those of the conventional viscose fiber.