<p>The growing demand for clean energy technologies and sustainable carbon management has arisen globally due to the rapid increase in carbon dioxide (CO₂) emissions, driven by swift urbanisation and industrialisation. Li-CO₂ batteries, despite their high theoretical specific energy density (1876 Wh kg^− 1) and unique capacity to utilise CO₂ as a reactant, have emerged as a promising solution for integrating energy storage with carbon mitigation. This article aims to bridge the gap between fundamental electrochemical research and practical applications of Li-CO₂ batteries by critically evaluating recent challenges and advancements. Notable issues such as low energy efficiency, poor cycling stability, electrolyte degradation and the formation of insulating lithium carbonate (Li₂CO₃) layers resulting from inadequate cathodic catalytic activity continue to hinder practical deployment, despite the dual advantages of CO₂ utilisation and energy regeneration. The development of metal-based cathode catalysts that eliminate the need for binders and feature a porous structure addresses significant challenges like high energy loss, low efficiency and rapid capacity decline. This review also emphasises the effects of CO₂ concentration, electrolyte composition and operating temperature on electrochemical performance. It provides an in-depth discussion of CO₂ reduction and evolution mechanisms, along with recent advancements in electrolyte systems and cathode materials. Through integrating insights from material science and electrochemical engineering, Li-CO₂ batteries are progressing towards practical, scalable applications in energy storage and carbon-neutral technologies, although identifying future directions and proposing strategies to overcome existing obstacles.</p> Graphical abstract <p></p>