The biogas project for domestic sewage treatment (BPDST) is considered a promising facility for wastewater management in rural areas of China. This paper explores previous experimental works, cost analysis, and BPDST structure and design based on Chinese literature. Opportunities for developing decentralized or neighborhood-based BPDSTs include fulfilling Millennium Development Goals (MDGs) and Sustainable Development Goals (SDGs), the water pollution situation and deficiency of wastewater treatment facilities, the advantages of BPDSTs compared with centralized sewage plant, government support and policy drive for rural wastewater treatment, and reuse demand for resources. Meanwhile, challenges faced are emphasized as follows: uncertain responsibility for BPDSTs under different governmental departments restricts BPDST development and should be specified; uncertain effluent quality due to low efficiency of nutrient removal requires aerobic post-treatment to some extent; rural environmental awareness is still low and should be heightened; more funds should be invested in R&D for improvement of technology innovation; more reuse and resource recovery elements should be considered during implementation; follow-up services are lacking and should be improved; and BPDST maintenance should be trained. This paper could provide valuable reference for other developing countries.