Lignin is a heterogeneous aromatic biopolymer composed of diverse aromatic monomers linked by various types of chemical bonds, which make the efficient degradation and cost-effective transformation of lignin a formidable global issue. Recent studies have discover unique non-specific redox systems inherent in microorganisms and the metabolic capacity of microorganisms for degrading aromatic compounds, shedding light on lignin valorization. Given that most of lignin-derived aromatic monomers contain methoxy groups, demethylation emerges as a rate-limiting step in the metabolism of these compounds. This review offers an extensive summary of the latest studies about the biological and enzymatic mechanisms of demethylation during the biodegradation of lignin. Meanwhile, by examining exemplary studies on lignin valorization with novel aromatic demethylases, this paper highlights the pivotal role of understanding microbial demethylation mechanisms and mining new demethylases in lignin degradation and transformation.