Lithium, an essential element for energy storage technologies, is experiencing surging demand due to its extensive application in lithium-ion batteries (LIBs). Traditional extraction methods, such as mining and chemical leaching, pose substantial environmental challenges, including high energy consumption, substantial waste production, and excessive water usage. In this framework, lithium bioleaching has arisen as a promising, eco-friendly, and sustainable substitute for lithium recovery, which leverages the metabolic activities of microbes to solubilize lithium from primary ores, secondary sources like waste LIBs, and other lithium-containing materials. Microbials have demonstrated potential in bioleaching applications because they can yield organic acids and other metabolites that enhance lithium solubilization. Additionally, bioleaching offers the advantage of operating at ambient conditions, reducing the carbon footprint and operational costs accompanying traditional methods. Recent advancements in molecular biology and metabolic engineering have further optimized microbial efficiency, enhanced lithium recovery rates, and made the process more viable for industrial applications. This review explores the sources of lithium, the analytical structure of LIBs, and the extraction of lithium from spent LIBs. It also discusses the mechanisms and methods of lithium bioleaching, and different factors affecting bioleaching. The integration of the bio-circular economy perspective with lithium bioleaching into closed-loop systems for LIB recycling to minimize waste and recover valuable materials.