Upcycling of waste polyethylene into liquid fuels with a narrow molecular-weight distribution presents significant potential for advancing the circular economy. Compared to pyrolysis and catalytic cracking, hydrocracking using bifunctional catalysts offers distinct advantages such as lower reaction temperatures, higher product saturation, reduced CO2 emissions, and effective heteroatom removal. These benefits position it as a highly promising route for plastic waste valorization. Nevertheless, the intricate reaction mechanisms have hindered the clear understanding on structure-performance relationship. Therefore, the rational design and synthesis of catalysts optimized for specific target products remain a critical challenge. This review focuses on the precise regulation of bifunctional catalyst microstructures (including metal dispersion, metal activity, acid activity, and metal-acid distance) in polyethylene hydrocracking, and further elucidates the structure-performance relationship between catalyst and product selectivity. To better understand the catalyst design strategies, hydrocracking mechanism over bifunctional catalysts is firstly introduced. Next, progress in research to understand the metal sites and acid sites of bifunctional catalysts will be presented. The hydrocracking activities of bifunctional catalysts will also be investigated to demonstrate the metal-acid balance. Finally, the current challenges and future perspectives on optimization, precise design, and practical application of the bifunctional catalysts in polyethylene hydrocracking system will be proposed.