Among several liquid alternative fuels, biobutanol has shown great promise because of its very similar properties to gasoline. This review provides an overview of research activities in acetone–butanol–ethanol (ABE) fermentation over the past two and a half decades. We have addressed seven important facets of ABE fermentation, viz. biochemistry, microbial cultures, alternative substrates, solvent recovery, fermentation mode and reactor designs, mathematical modeling, and economics. Development of mutant strains having higher yield, selectivity and tolerance to inhibition, and search for cheap alternative substrates for fermentation are most important thrust areas in biobutanol production. New and efficient processes have been developed for in situ removal and recovery of the ABE solvents. Several rigorous kinetic and physiological models for fermentation have been formulated, which form useful tool for optimization of the process. These research activities have been reviewed in this paper. Finally, we have summarized studies on the economic viability of large-scale ABE fermentation processes employing various process designs, substrates, and microbial cultures. With the use of new strains, inexpensive substrates, and superior reactor designs, economic potential of ABE fermentation has been found to be highly attractive. Research efforts in science, engineering, and economics of ABE fermentation have brought biobutanol close to commercialization as liquid alternate fuel. Copyright © 2011 John Wiley & Sons, Ltd.