<p>Xylooligosaccharides (XOS), short-chain xylose oligomers derived from hemicellulose, have emerged as a promising prebiotic fiber with significant potential for modulating human and animal health. Recently, generation of XOS prebiotics from underutilized biorefinery streams also has gained global recognition as a promising circular bioeconomy approach to conserve resources and promote sustainable agricultural systems. Particularly, high-purity XOS products (92%–96% purity) have been effectively generated from various biomass sources using integrated hydrolysis and membrane filtration systems. Extensive efforts have been placed on investigating potential beneficial effects of XOS on hosts and production of XOS from different lignocellulosic sources. However, research on the landscape of XOS-utilizing bacteria in the intestine is still in its infancy and the mechanisms of observed beneficial effects conferred by gut XOS-utilizing bacteria are also largely unknown. To achieve the goal of developing XOS prebiotics as precision nutraceuticals with consistent and sustained efficacy, understanding complex mechanisms of XOS metabolism by diverse gut bacteria is highly warranted. In this review, in addition to summarizing XOS production processes and beneficial effects of XOS prebiotics on human and animal hosts, we comprehensively reviewed structural and functional variability of XOS prebiotics as well as current knowledge on metabolism of XOS by specific probiotics of interest. We also identified several significant knowledge gaps in basic science and proposed to develop precision XOS prebiotics that are based upon holistic mechanistic studies, such as discovery and characterization of new XOS-utilization gut bacteria and development of XOS-based synbiotics for targeted applications in livestock production system and human nutraceuticals.</p>