The tequila industry is a fundamental pillar of Mexico’s economy, especially for the Lerma-Chapala region of Michoacan state. However, tequila production faces significant environmental challenges due to the rising generation of vinasse, a by-product of its distillation. Due to its high organic content and nutrients, improper vinasse management can lead to severe environmental effects, such as water contamination, air pollution, and soil degradation, all posing risks to biodiversity, water quality, agriculture, and wildlife. To address these challenges, sustainable vinasse management becomes crucial to safeguard the region’s ecosystem and water supply, vulnerable to eutrophication and other industrial damaging impacts. Departing from the existing literature, this chapter highlights the need for Tequila producers to adopt cleaner technologies and more efficient methods to treat and reuse vinasse, transforming it into valuable products like bioenergy and biofertilizers. Such solutions not only may mitigate environmental impacts but also can create additional economic opportunities. Through a comprehensive analysis guided by a case study method, this chapter evaluates current vinasse management practices and explores the potential for renewable energy and biofertilizer production. It also discusses the current practices that seem to prompt technical, economic, and regulatory barriers. It then proposes public policies encouraging cross-sectoral cooperation to shift current vinasse production from a waste organic by-product to a valuable renewable resource.