The most common classification is based on rank, referring to the degree of coalification that has occurred. The rank of a coal is determined primarily by the depth of burial and temperature to which the coal was subjected over time. With increasing temperature, peat is converted to lignite, a very soft, low-rank coal. With further increases in temperature, lignite is transformed into subbituminous coal and then into bituminous coal. At even higher temperatures, usually accompanied by intense deformation generated by the folding and faulting of the Earth's crust, anthracites (anthracite), the highest rank of coal, are produced. The increase in coal rank is accompanied by increases in the amount of fixed carbon and by decreases in the amount of moisture and other volatile material in the coal. In general, the calorific (heat) value of coal increases with rank from lignite through bituminous coal. In addition, the terms used for various coal ranks vary from country to country.

Coal may be classified in rock types (or lithotypes) based on the presence of petrological components known as macerals (maceral). Based on maceral content and its appearance in a hand specimen, coal is classified into four principal types: clarain, durain, fusain, and vitrain.

Coal may also be classified in grades using subjective terms (e.g., “low-sulfur coal,” “high-ash coal”) with reference to their impurities for commercial purposes.