Lignin-modified asphalt shows potential as a sustainable and durable pavement material, utilizing lignin, a complex aromatic polymer and byproduct of the paper and biofuel industries. Historically underutilized, lignin is now being explored as a renewable asphalt additive to reduce reliance on petroleum-derived binders and enhance road construction’s environmental sustainability. Research indicates that incorporating lignin into asphalt improves mechanical properties, increasing rigidity and resistance to deformation, which mitigates issues like rutting and cracking. Lignin also enhances asphalt’s resistance to thermal and oxidative aging, prolonging pavement lifespan. Replacing a portion of petroleum-based bitumen with renewable lignin reduces the carbon footprint of pavement construction, aligns with waste valorization, and supports the circular economy by giving high-value applications to a previously low-value byproduct. However, successful implementation depends on addressing challenges such as variations in lignin’s chemical composition, influenced by its source and extraction methods, which affect its compatibility and performance in asphalt. Optimization of lignin content and processing conditions is crucial to achieving the desired performance balance. Further field studies are necessary to evaluate the long-term performance and environmental impacts of lignin-modified asphalt in real-world conditions. While challenges remain, continued research and development are expected to establish lignin as a key component in asphalt technology. This advancement could significantly contribute to sustainable infrastructure by reducing environmental impact and promoting the use of renewable resources in road construction.