Torrefaction is a vital pretreatment technology for thermochemical biorefinery applications like pyrolysis, gasification, and liquefaction. Oxidative torrefaction, an economical version of torrefaction, has recently gained much attention in the renewable energy field. Recent literature on inert and oxidative torrefaction was critically reviewed in this work to provide necessary guidance for future research and commercial implementations. The critical performance parameters of torrefaction for thermochemical biorefinery applications, such as solid yield, energy yield, carbon enhancement, higher heating value (HHV) enhancement, and energy-mass co-benefit index (EMCI), were also analyzed. Agricultural waste, woody biomass, and microalgae were considered. The analysis reveals that woody biomass could equally benefit from oxidative or inert torrefaction. In contrast, inert torrefaction was found more suitable for agricultural wastes and microalgae. Using flue gas as the oxidative torrefaction medium and waste biomass as the feedstock could achieve a circular economy, improving the sustainability of oxidative torrefaction for thermochemical biorefineries. The significant challenges in oxidative torrefaction include high ash content in torrefied agricultural waste, the oxidative thermal runaway of fibrous biomass during torrefaction, temperature control, and scale-up in reactors. Some proposed solutions to address these challenges are combined washing and torrefaction pretreatment, balancing oxygen content, temperature, and residence time, depending on the biomass type, and recirculating torrefaction gases.