Ionic liquids have shown great potential in the last two decades as solvents, catalysts, reaction media, additives, lubricants, and in many applications such as electrochemical systems, hydrometallurgy, chromatography, CO2 capture, etc. As solvents, the unlimited combinations of cations and anions have given ionic liquids a remarkably wide range of solvation power covering a variety of organic and inorganic materials. Ionic liquids are also considered &ldquo / green&rdquo / solvents due to their negligible vapor pressure, which means no emission of volatile organic compounds. Due to these interesting properties, ionic liquids have been explored as promising solvents for the dissolution and fractionation of wood and cellulose for biofuel production, pulping, extraction of nanocellulose, and for processing all-wood and all-cellulose composites. This review describes, at first, the potential of ionic liquids and the impact of the cation/anion combination on their physiochemical properties and on their solvation power and selectivity to wood polymers. It also elaborates on how the dissolution conditions influence these parameters. It then discusses the different approaches, which are followed for the homogeneous and heterogeneous dissolution and fractionation of wood and cellulose using ionic liquids and categorize them based on the target application. It finally highlights the challenges of using ionic liquids for wood and cellulose dissolution and processing, including side reactions, viscosity, recyclability, and price.