Prefabricated buildings have gained popularity in recent years due to their potential to transform the construction industry. This paper reviews the benefits, challenges, and future directions of prefabricated buildings, highlighting their advantages in terms of sustainability, cost-effectiveness, and quality control. We explore various types of prefabricated buildings, including modular, panelized, and hybrid structures, and discuss their applications in residential, commercial, and industrial sectors. Our analysis reveals that prefabricated buildings offer significant environmental benefits, reduced construction times, and improved building performance. However, challenges persist, including regulatory barriers, transportation limitations, and public perception. We recommend further research, standardization, and policy support to fully harness the potential of prefabricated buildings.