Efficiently producing second-generation biofuels from biomass is of strategic significance and meets sustainability targets, but it remains a long-term challenge due to the existence of biomass recalcitrance. Lignin contributes significantly to biomass recalcitrance by physically limiting the access of enzymes to carbohydrates, and this could be partially overcome by applying a pretreatment step to directly target lignin. However, lignin typically cannot be completely removed, and its structure is also significantly altered during the pretreatment. As a result, lignin residue in the pretreated materials still significantly hindered a complete conversion of carbohydrate to its monosugars by interacting with cellulase enzymes. The non-productive adsorption driven by hydrophobic, electrostatic, and/or hydrogen bonding interactions is widely considered as the major mechanism of action governing the unfavored lignin-enzyme interaction. One could argue this type of interaction between lignin residue and the activated enzymes is the major roadblock for efficient enzymatic hydrolysis of pretreated lignocellulosics. To alleviate the negative effects of lignin on enzyme performance, a deep understanding of lignin structural transformation upon different types of pretreatments as well as how and where does lignin bind to enzymes are prerequisites. In the last decade, the progress toward a fundamental understanding of ligninenzyme interaction, structural characterization of lignin during pretreatment and/or conformation change of enzyme during hydrolysis is resulting in advances in the development of methodologies to mitigate the negative effect of lignin. Here in this review, the lignin structural transformation upon different types of pretreatments and the inhibition mechanism of lignin in the bioconversion of lignocellulose to bioethanol are summarized. Some technologies to minimize the adverse impact of lignin on the enzymatic hydrolysis, including chemical modification of lignin, adding blocking additives, and post-treatment to remove lignin were also introduced. The production of liquid biofuels from lignocellulosic biomass has shown great environmental benefits such as reducing greenhouse gas emissions and mitigate climate change. By addressing the root causes of lignin-enzyme interaction and how to retard this interaction, it is our hope that this comprehensive review will pave the way for significantly reducing the high cost associated with the enzymatic hydrolysis process, and ultimately achieving a cost-effective and sustainable biorefinery system.