Bangladesh has been facing severe energy crises (lack of electricity and gas supply network) during the last three decades, especially in rural areas. These areas are characterized by their often inefficient use of woody biomass, mainly for cooking purposes. To avoid the resulting environmental degradation and achieve sustainable development, access to clean and affordable energy is essential. Upgrading existing biomass resources (i.e., animal manure, crop residues, kitchen waste and green wastes) to biogas shows significant promise in this respect. This article presents a review of the current status of biogas digester technology in Bangladesh with focus on households in rural areas, covering 75% of the total population. Currently there exists a substantial gap between technical and cost-effective potential and the achievable potential due to lack of technical knowledge, high installation and operation costs, feedstock availability and limited end user applications. As a result only one percent of the overall biogas potential, estimated at 14.5x106 m3/yr, has been achieved despite government programs for promoting digester installation. Via in-field surveys this review has identified problems in the construction, maintenance and operation of biogas digesters, particularly in overall performance of household digesters. Based on these results a number of operational and technology improvements are suggested. Three digester implementation scenarios are introduced, and performance and cost estimates are projected to 2040. The most ambitious scenario leads to a five-fold increase in biogas output as compared to today’s levels; levelized energy costs can be halved with proper choice of digester technology.