Pneumonia, classified as a lower respiratory tract illness, affects different parts of the bronchial system as well as alveoli and can present with varying severities depending on co-morbidities and causative pathogens. It can be broadly classified using the setting in which it was acquired, namely the community or hospital setting, the former being more common and spreading through person-to-person droplet transmission. Community-acquired pneumonia (CAP) is currently the fourth leading cause of death worldwide, and its high mortality makes continual insight into the management of the condition worthwhile. This review explores the literature specifically for severe CAP (sCAP) and delves into the diagnosis, various modalities of treatment, and management of the condition. This condition can be defined as pneumonia requiring mechanical ventilation in the ICU and/or presenting with sepsis and organ failure due to pneumonia. The disease process is characterized by inflammation of the lung parenchyma, initiated by a combination of pathogens and lowered local defenses. Acute diagnosis of the condition is vital in reducing negative patient outcomes, namely through clinical presentation, blood/sputum cultures, imaging modalities such as computed tomography scan, and inflammatory markers, identifying common causative pathogens such as Streptococcus pneumoniae, rhinovirus, Legionella, and viral influenza. Pathogens such as Escherichia coli should also be investigated in patients with chronic obstructive pulmonary disease. The mainstay of treating sCAP includes rapid ICU admission once a diagnosis has been confirmed, initiating sepsis protocol, and treatment with combined empiric antibiotic regimens consisting of beta-lactams and macrolides. Corticosteroid use alongside antibiotics shows promise in reducing inflammation, but its use has to be judged on a case-by-case basis. New drugs such as omadacycline, delafloxacin, and zabofloxacin have shown valid evidence for the treatment of resistant causative organisms. The main guidelines for preventing sCAP include maintaining a healthy lifestyle, and annual pneumococcal and influenza vaccines are recommended for the most vulnerable patient groups, such as those with COPD and immunosuppression.