1,3-Propanediol (PDO) is an important chemical extensively used in material science and the cosmetics industry. The biomanufacturing of PDO offers numerous advantages, such as the renewability of raw materials and environmental friendliness. Among various microorganisms, Clostridium pasteurianum emerges as an ideal choice for industrial PDO production due to its safety, non-pathogenic nature, rapid glycerol metabolism, fast growth rate, independence from expensive culture medium components, and its inherent efficient metabolic pathway for PDO production. This review begins by introducing the current state and challenges of PDO biomanufacturing, followed by an in-depth discussion of the methods for producing PDO using C. pasteurianum. Special attention is paid to the glycerol metabolism mechanism, strategies for glycerol fermentation, and the design of the fermentation process. Notably, our research group has identified C. pasteurianum mutant strains and developed robust processes that have largely addressed the organism’s traditional sensitivities to environmental conditions, especially regarding iron concentration and impurities of raw glycerol. In an electricity-aided fermentation process, PDO concentration as high as 120.6 g/L was achieved, with a productivity of 4.8 g/(L·h) and a yield reaching the theoretical maximum. We further discuss the natural limitations of genetic engineering in C. pasteurianum, exploring strategies based on rational genomic modification and directed evolution. Finally, the development of efficient downstream processing technologies is emphasized as crucial for realizing the cost-effective microbial production of PDO from renewable resources, since the industrial application of PDO requires a very high purity (>99.9%). The discussion on PDO downstream processing mainly focuses on evaporation, distillation, and extraction-based purification techniques. Through a comprehensive coverage of metabolic engineering, strain evolution, fermentation optimization, and product separation technologies, this review discusses about the characteristics and advantages of PDO production from C. pasteurianum, highlighting key considerations for advancing this microorganism as a new industrial chassis.