Bio-methanol and bio-butanol production from waste materials through metabolic engineering of extremophiles presents a distinct approach to sustainable biofuel synthesis. This chapter examines recent progress in leveraging engineered microbial systems to convert various waste substrates, such as agricultural residues, industrial by-products, and municipal waste, into valuable biofuels. Recent improvements in metabolic engineering have offered the construction of highly efficient microbial strains with improved methanol and butanol productivity through the modification of carbon flow and cofactor availability and alteration of rate-limiting enzymes. Recent advances in synthetic biology tools, CRISPR-based genome editing, and omics have ramped up the pace of the discovery of metabolic pathways and their optimization for enhanced yield, productivity, and substrate utilization. However, this is still a hurdle in the production of IKE because of low product titers, the development of by-products, and the challenging scale-up of this technology. This chapter reviews recent breakthroughs in strain engineering, process intensification, and reactor design, highlighting strategies for overcoming current bottlenecks. Moreover, there is an analysis of the environmental and economic aspects of bio-methanol and bio-butanol production from waste and the possible place of biofuels in the concept of circular bio-economy. This chapter culminates with an assessment of new frontiers that involve the coordination of metabolic engineering with biorefineries for the sustainable production of biofuels.