The advancement in water treatment technology has revolutionized the progress of membrane bioreactor (MBR) technology in the modern era. The large space requirement, low efficiency, and high cost of the traditional activated sludge process have given the necessary space for the MBR system to come into action. The conventional activated sludge (CAS) process and tertiary filtration can be replaced by immersed and side-stream MBR. This article outlines the historical advancement of the MBR process in the treatment of industrial and municipal wastewaters. The structural features and design parameters of MBR, e.g., membrane surface properties, permeate flux, retention time, pH, alkalinity, temperature, cleaning frequency, etc., highly influence the efficiency of the MBR process. The submerged MBR can handle lower permeate flux (requires less power), whereas the side-stream MBR can handle higher permeate flux (requires more power). However, MBR has some operational issues with conventional water treatment technologies. The quality of sludge, equipment requirements, and fouling are major drawbacks of the MBR process. This review paper also deals with the approach to address these constraints. However, given the energy limitations, climatic changes, and resource depletion, conventional wastewater treatment systems face significant obstacles. When compared with CAS, MBR has better permeate quality, simpler operational management, and a reduced footprint requirement. Thus, for sustainable water treatment, MBR can be an efficient tool.