Several factors such as climate change, increment in fuel cost and digital technology era have lead to transformation of conventional grid into smart grid. Existing microgrid can be integrated with smart grid characteristics by various topologies, including cogeneration system where both electricity and thermal energy from single source of fuel can be produced. Cogeneration system has better efficiency, lower costs and able to reduce greenhouse gas emissions compared to singular conventional methods. This paper presents a comprehensive review of cogeneration system, covering the principle operation and types of prime movers available for use in power plant, building and industrial plant. Prime movers such as gas turbine, steam turbine, micro turbine, reciprocate engine and fuel cell are compared in terms of size (kW), efficiency and principal operation. This review also describes the hierarchical control system for cogeneration system; classified into three types, which are local, centralized and decentralized. This study tries to find the most suitable control strategy for certain cogeneration system by referring to the related standards available. A number of cogeneration applications in commercial buildings, including hospital, airport, shopping complex and hotel, are presented to show the effectiveness of the cogeneration system. Overall, this paper presents comparison between each prime mover technology, factors that influence the selection of prime movers, challenges and prospects of cogeneration system.