Internal combustion engines (ICEs) have contributed to world emissions dominantly, which is why hydrogen (H2) as a fuel has been an eye-catcher for researchers to achieve zero carbon emissions. This comprehensive review assesses the current challenges and advancements in H2-fueled ICEs, highlighting their potential to revolutionize the automotive industry while addressing environmental concerns. Despite the numerous advantages of H2–ICEs, including sustainability and reduced emissions, they face significant obstacles in areas such as engine efficiency, NOx emissions, engine knock, and safety. The review emphasizes utilizing hydrogen in the internal combustion engines covering both spark-ignition (SI) and compression-ignition (CI) engines. Integration of hydrogen fuel with existing automotive technologies (which are also compatible with other fossil fuel alternatives, viz. biodiesel, bioethanol, biomethane, etc.) is vital to realizing the full potential of hydrogen-fueled engines. Moreover, it is noteworthy that the combustion analysis using 3D CFD simulation has been proven to be of great help considering the risk factors associated with hydrogen utilization in ICEs. Therefore, various analyses and outcomes from the CFD simulations reported in the literature are reviewed and discussed critically in the present study. Ultimately, this review provides a critical assessment of the current state of H2–ICEs and outlines a roadmap for a more sustainable and resilient future in the transportation sector. The findings offer valuable insights and guidance for the researchers to address the complex challenges and leverage the opportunities presented by hydrogen-fueled internal combustion engines.