Anaerobic digestion is one of the most sensitive wastewater treatment processes where a major component of organic matter such as carbohydrates, proteins, and lipids are degraded by the syntrophic correlation between anaerobic microorganisms. The anaerobic reactors in desiccated coconut processing plants are frequently subjected to lipid inhibition due to the presence of oily compounds consisting of high concentrations of medium-chain and long-chain fatty acids. Improper treatment leads to severe issues such as biomass washout, inefficient treatment, and reactor failures during anaerobic digestion. This review critically analyzes lipid inhibition mechanism and controlling factors to overcome the inhibition during anaerobic digestion. The existing strategies provide positive outcomes to overcome lipid inhibition. However, the effectiveness of these strategies may change due to process variations and different environmental conditions. Therefore, more research should be further conducted to optimize these strategies to improve process stability, treatment efficiency, and economic viability of desiccated coconut wastewater treatment. Display omitted •Lipid inhibition is the major challenge in the anaerobic digestion of DCWW.•The mechanism and effects of lipid inhibition are elaborated.•Existing strategies to overcome lipid inhibition are critically discussed.•Novel strategies to overcome lipid inhibition for DCWW are presented.•The commercially viable novel strategies to avoid lipid inhibition are essential.