The oil palm industry produces substantial amounts of oil palm biomass (OPB), which remains largely underutilised, with conventional applications limited to electricity generation, composting, and boiler fuel. In light of increasing environmental concerns and the push for sustainable resource management, valorisation of OPB for activated carbon (AC) production has garnered substantial attention, particularly in palm oil-producing regions. This review critically investigated the potential of an integrated carbonisation and activation process for producing high-quality AC from OPB. The findings showed that this innovative approach enhanced AC’s physicochemical properties while improving production efficiency. Furthermore, using OPB-derived AC in wastewater treatment and air purification applications highlighted its dual benefits of environmental impact mitigation and value addition. This study comprehensively reviewed technological advancements, challenges and practical implications for optimising OPB utilisation, advancing sustainable pathways for AC production and waste management in the palm oil industry.