Abstract In recent years, the Chilean energy sector has gone through a significant transformation. Chile ratified the Paris Agreement in 2017 and committed to develop policies to face climate change and to transition to a more sustainable energy system. Promoting renewable energy and energy efficiency became an essential strategy for Chile to reduce emissions and reach its energy and environmental goals, which are addressed in various governmental studies. Further, Chile became successful in promoting renewable electricity production without feed-in tariffs. The current national goal is for at least 70% of the electricity in Chile to be generated from renewable energy sources by 2050. Additionally, energy efficiency is to be implemented in several sectors. This paper provides a broad overview of the energy sector and review of the Chilean energy policy development and environmental targets with emphasis on recent years. Finally, it also proposes an assessment about existing and required energy policy instruments for Chilean energy sectors by considering the promotion of renewable energy and energy efficiency and analyses the associated potential challenges. This work can provide insights to decision makers to develop long-term sustainable energy plans for Chile to reach its energy and environmental goals.