Electric three-wheelers (E3Ws) are redefining urban transportation by addressing sustainability, operational efficiency, and cost-effectiveness. Transportation contributes nearly 24% of global CO2 emissions, and E3Ws offer a cleaner alternative with zero tailpipe emissions and lifecycle greenhouse gas (GHG) reductions of 40–60% when powered by renewable energy. Technological advancements, including lithium-ion batteries with energy densities exceeding 300 Wh/kg and solar integration, have significantly improved range and performance. Cost analyses reveal E3Ws operate at 50% of the cost-per-kilometre compared to internal combustion engine (ICE) vehicles, with drivers reporting income increases of up to 50%. However, adoption barriers remain. Urban areas face a 70% shortfall in charging infrastructure, while high initial investment costs deter rural deployments. Despite these challenges, policy incentives such as subsidies in India and Bangladesh are accelerating adoption. Integration into public transport networks has enhanced last-mile connectivity, reducing transit times by 20–30%. Future opportunities include rural deployment for agricultural logistics and leveraging AI and IoT for smarter fleet management and safety. Recycling batteries could further cut costs by 15–20%. This review highlights E3Ws’ advancements, challenges, and transformative potential in achieving sustainable transportation goals through innovation and policy support.