The development of bioenergy markets is beneficial from a climate perspective and helps ensure sustainable forest management both locally and globally. This study aimed to provide an overview of the current state of Lithuanian forest biomass resources with a particular focus on the legal, economic and ecological aspects of forest biomass use for energy and to identify the lessons that should be learned from the history of biomass introduction in the country’s energy sector. These experiences and lessons are valuable both nationally and internationally, where good practices and challenges for the introduction and development of forest biomass for energy production are revealed. We examined the question of whether regulatory drivers in the energy sector can increase forest biomass use for energy production and contribute to sustainable development of Lithuania. To answer this question, we described the legal and market instruments regulating forest biomass use for energy production, the forestry sector and renewable energy policy in Lithuania, the current and potential amount of forest biomass available for energy production and ecological considerations relating to forest biomass use for energy. In Lithuania, forest biomass resources are strategically important for the renewable energy sector. The National Energy Strategy of Lithuania aims to increase the share of renewable energy sources, including forest biomass, within the total energy consumption, with targets of 30% in 2020, 45% in 2030 and 80% in 2050. Lithuania successfully achieved the target of EU legislation on renewables in 2015 ahead of the obligation to achieve it in 2020. Renewable energy is mainly used in heating, as well as in the electricity and transport sectors. This has resulted in a significant price reduction for end users due to the increased use of biomass, mainly local forest biomass, for heat energy production and in the emergence of a biofuel exchange, which acts as a system of biomass auctions that to some extent prevent unjustified price increases. Legislation developed for the energy biomass market in Lithuania allows efficient restructuring of the energy sector, especially for heat production. The Lithuanian energy sector has already successfully replaced imported and relatively expensive natural gas with locally available cheaper renewable energy sources (RES). Compliance with formal environmental regulations is required to protect the soil, ground vegetation, understory and biodiversity during commercial tree harvesting. Lithuania has basic guidelines for the use of wood ash as a compensatory fertiliser, with strict requirements for the chemical quality of wood ash.