Bio-oil is a potential biofuel for fossil fuel substitution due to its great versatility in feedstock and environmental benefits. In particular, bio-oil derived from palm empty fruit bunches (PEFB) has drawn considerable research attention in recent years owing to the abundant supply of PEFB and the emergence of motivation to turn waste into wealth for environmental sustainability. Therefore, this paper aims to provide a state-of-the-art review on the bio-oil derived from PEFB. A particular emphasis is placed on the optimum production conditions of PEFB-derived bio-oil by various fast pyrolysis and liquefaction processes, as well as on the characteristics of PEFB-derived bio-oil in terms of their physicochemical properties, major chemical components and their compositions. A comparison of physicochemical properties of PEFB-derived bio-oil with those of other biomass-derived bio-oil and petroleum fuel oil is also outlined. Upgrading of PEFB-derived bio-oil by different methods along with its fuel applications and future prospects are also discussed.