Soil health degradation, driven by intensive agriculture, deforestation, and climate change, has become a pressing global issue, demanding sustainable restoration solutions. Biochar, a carbon-rich material produced via pyrolysis of organic matter, has garnered attention as a potent soil amendment. It offers significant benefits, including improved soil structure, enhanced nutrient retention, increased water-holding capacity, and better crop productivity. Additionally, biochar plays a crucial role in carbon sequestration, thereby contributing to climate change mitigation. This article reviews the applications of biochar in soil restoration and examines the mechanisms through which it enhances soil health. It discusses how biochar contributes to long-term carbon storage in soils, reduces greenhouse gas emissions, and supports soil microbial activity. Furthermore, the review highlights biochar’s role in rehabilitating degraded agricultural lands, restoring ecosystems, and remediating contaminated urban soils. While biochar presents numerous benefits, its large-scale adoption faces challenges such as variability in its properties based on production methods, high production costs, and the need for long-term impact studies. The article outlines these challenges and offers directions for future research, including optimizing biochar production, standardizing its application, and exploring its interactions with different soil types and ecosystems.