Palm wine, a traditional alcoholic beverage derived from the spontaneous fermentation of palm sap, serves as a cultural and nutritional staple across tropical regions of Africa, Asia, and Latin America. This review delves into the intricate microbial ecosystems and biochemical pathways that underpin palm wine production, emphasizing its unique terroir-driven sensory profile and health-promoting properties. Unlike commercial fermented beverages, palm wine’s fermentation relies on autochthonous microbial communities predominantly Saccharomyces cerevisiae, Lactobacillus plantarum, and Acetobacter species that are shaped by biogeographical factors such as palm species (Elaeis guineensis in West Africa, Borassus flabellifer in South Asia), climatic conditions, and artisanal tapping practices. These microbes orchestrate a dynamic metabolic interplay, converting sucrose-rich sap into ethanol (up to 5.28% w/v), organic acids (lactic acid: 0.05–4.7%; acetic acid: 0.01–0.24%), and volatile compounds (e.g., ethyl lactate, phenylethyl alcohol), which collectively define its effervescence, acidity, and complex flavor bouquet. Beyond its role as a social lubricant, palm wine harbors significant nutritional and therapeutic value, including B-vitamins, potassium, magnesium, and antioxidants. Emerging evidence highlights its probiotic potential, with lactic acid bacteria and yeast strains exhibiting antimicrobial, anti-inflammatory, and anti-diabetic properties. However, challenges such as rapid spoilage (<48 hours), inconsistent ethanol content, and contamination risks (e.g., Klebsiella pneumoniae) underscore the need for innovative preservation strategies, including controlled fermentation with tailored starter cultures and non-thermal pasteurization. By elucidating the nexus between microbial ecology, flavor chemistry, and health benefits, this work advocates for palm wine’s recognition as a functional food and its integration into sustainable agro-industrial value chains.