There has been an increase in demand for green demulsifiers that will be as effective as the chemical demulsifiers but without the negative environmental effects. This demand has been partly addressed with the production of some bio-based demulsifiers. It is of importance to know the substances that act as emulsifiers in the production of crude oil and understand the mechanism of emulsification. This paper has reviewed emulsifiers and the mechanism of emulsification as well as bio-based demulsifiers and their mechanisms. This will enhance our knowledge on the type of compounds that can be used in the formation of effective demulsifiers. Innovation of these demulsifiers will enhance crude oil production and in the long run boost profitability and environmental sustainability. Currently, cashew nut shell liquid (CNSL) derivatives are in use for the formulation of effective green demulsifiers for water-in-crude oil emulsions.