Abstract: High optical transmittance in transparent wood requires reducing visible-light absorption by chromophoric groups and suppressing light scattering by decreasing internal voids, improving refractive-index matching among the constituent phases, and minimizing interfacial defects. Effective flame retardancy generally requires the incorporation of sufficient flame-retardant components to regulate thermal decomposition and promote char formation upon heating. However, the incorporation of flame-retardant components may increase visible-light absorption and cause interfacial refractive-index mismatch, thereby creating an intrinsic trade-off that hinders the simultaneous enhancement of optical transmittance and flame retardancy. Centered on this trade-off, this review outlines the combustion behavior and evaluation methods of wood, examines the applicability and limitations of conventional flame-retardant treatments in transparent wood, and summarizes three technical pathways, namely wood-template flame-retardant modification, polymer-matrix flame-retardant modification, and multi-process synergistic flame retardancy. The effects of these pathways on heat release, smoke production, optical transmittance, haze, and mechanical properties are discussed. Among these pathways, wood-template flame-retardant modification is suitable for applications requiring high retention of mechanical properties after modification. Polymer-matrix flame-retardant modification is preferable for applications in which high optical transmittance is the primary requirement. Multi-process synergistic flame retardancy is more appropriate for applications with stringent fire-safety requirements. Finally, future directions for flame-retardant transparent wood are proposed in terms of coordinated structure–property design, fabrication process optimization, and the development of green and safe flame-retardant systems, with the aim of providing theoretical guidance for its engineering applications and standardized evaluation.