Nerolidol, an oxygenated sesquiterpene (C15H26O) that occurs in plants, exhibits significant bioactivities such as antioxidant, anti-inflammatory, antimicrobial, and neuroprotective activities. It is a U.S. Food and Drug Administration-approved flavoring agent and a common ingredient in several commercial products such as toiletries and detergents. In addition, the potential applications of nerolidol that may prove beneficial for human health, agriculture, and the food industry have garnered increasing attention from researchers in these fields. Recent years have witnessed the application of metabolic engineering and synthetic biology strategies for constructing microbial cell factories that can produce nerolidol, which is considered a sustainable and economical approach. This review summarizes recent research on the biological activities and applications of nerolidol as well as nerolidol production using microbial cell factories. In addition, the synthesis of bioactive derivatives of nerolidol is addressed. In summary, this review provides readers with an updated understanding of the potential applications and green production prospects of nerolidol.