Addressing the environmental challenges posed by conventional construction materials has become a priority, leading to the exploration of sustainable alternatives. Lightweight foamed concrete (LFC) stands out as a viable option due to its advantageous properties, such as low density, thermal and acoustic insulation, and reduced environmental impact. This review examines the progress made in the development of LFC, focusing on its composition, production processes, and performance characteristics, with an emphasis on its potential for promoting sustainable construction. The study delves into the role of supplementary cementitious materials (SCMs), including fly ash, silica fume, and ground granulated blast furnace slag, in minimizing dependence on ordinary Portland cement and reducing carbon emissions. Additionally, it explores the use of alternative fine aggregates and the refinement of foaming techniques, which collectively enhance LFC's mechanical and thermal attributes. The effects of various production parameters on key properties such as workability, porosity, compressive strength, and thermal conductivity are also analyzed. The review identifies existing challenges, including the relatively lower mechanical strength of LFC compared to traditional concrete and the necessity for meticulous control over its composition and curing processes to ensure consistent performance. Emerging solutions, such as the integration of nanomaterials, innovative foaming agents, and customized curing strategies, are highlighted as promising directions for future research. This paper consolidates recent findings to emphasize LFC's potential as a sustainable and adaptable construction material. It highlights its practical applications, ongoing challenges, and opportunities for innovation, demonstrating its capability to reduce the construction industry's environmental footprint while meeting modern performance standards.