Graphene, a monolayer of graphite sheet consisting of sp2 hybridized carbon atoms covalently bonded to three other atoms (discovered in 2004), has recently attracted the attention of chemical sensor researchers owing to its unprecedented structural, mechanical and electrical properties. Excellent mechanical strength (Young modulus ∼0.05TPa), potentiality of ultrafast electron transport (highest mobility ∼200,000cm2/Vs) along with the best surface to volume ratio has opened up the opportunity to use the material for future gas and vapor sensors with ultra fast speed and long-term durability. Since it is a two dimensional material, every atom of graphene may be considered a surface atom and as a result every atom site may be involved in the gas interactions. This feature of graphene can eventually be responsible for its ultra sensitive sensor response with the lowest detection capability approaching even a single molecule. Further, the ease of functionalization of the material either by chemical means (absorption of many molecules like oxygen or hydrogen) or by application of voltage or pressure, facilitates bandgap-engineering which in turn may lead to a possible solution to the selectivity issues, the perennial problems of chemical sensors. In this review, the latest advancement and new perspectives of graphene based gas and vapor sensors have been discussed critically.