Abstract: The growing demand for oil imports and the pressure to tackle environmental degradation have given rise to mounting attentions on biogas development in China. A comprehensive overview of biogas development in China, technology improvement, and related government policies were provided. The potential driving forces and constraints for its future development were also systematically analyzed. Based on the results of this study, policy suggestions were recommended for the sustainable development of China’s biogas industry. The results showed that, with the development in the last 60 years, China’s biogas had increased rapidly, several models in sustainable use of biogas had emerged, and the government support had largely promoted biogas development in China. Although the concerns for energy shortage and environmental protection would still drive the expansion of China’s biogas in the future, the decline of backyard farming system, the shortage of household capacity in raising capital for biogas investment, and the incompleteness of biogas support policies would constrain the future development of biogas in China. Based on the results of this analysis, policy suggestions for sustainable development of China’s biogas in the future were provided.