Lignin, an abundant natural biopolymer derived from lignocellulosic biomass, has gained increasing attention for its potential in biomedical applications, particularly as a sustainable drug encapsulant. Its unique structural characteristics including diverse functional groups, high carbon content, and inherent biodegradability enable lignin to serve as a promising platform for the controlled delivery of therapeutic agents. This chapter delves into the structural complexity of lignin, its various sources, functional groups, and interunit linkages that influence its behavior in drug encapsulation. A range of lignin-based materials, including nanoparticles, hydrogels, films, and scaffolds, are discussed in relation to their capacity to entrap, encapsulate, and adsorb active pharmaceutical ingredients. Various fabrication methods such as nanoprecipitation, emulsification, and chemical conjugation are presented, highlighting lignin’s adaptability for targeted, stimuli-responsive, and sustained drug release. The chapter also reviews recent advances in lignin-based drug delivery for cancer therapy, wound healing, and imaging, while addressing toxicological concerns and regulatory challenges. Overall, lignin emerges as a versatile, eco-friendly, and biocompatible candidate for next-generation drug delivery systems.