Current power networks and consumers are undergoing a fundamental shift in the way traditional energy systems were designed and managed. The bidirectional peer-to-peer (P–P) energy transactions pushed passive consumers to be prosumers. The future smart grid or the internet of energy (IoE) will facilitate the coordination of all types of prosumers to form virtual power plants (VPP). The paper aims to contribute to this growing area of research by accumulating and summarizing the significant ideas of the integration of distributed prosumers and small-scale VPP to the internet of energy (IoE). The study also reports the characteristics of IoE in comparison to the traditional grid and offers some valuable insights into the control, management and optimization strategies of prosumers, distributed energy resources (DERs) and VPP. As bidirectional P–P energy transaction by the prosumers is a crucial element of IoE, their management strategies including various demand-response approach at the customers’-levels are systematically summarized. The integration of DERs and prosumers to the VPP considering their functions, infrastructure, type, control objectives are also reviewed and summarized. Various optimization techniques and algorithm, and their objectives functions and the types of mathematical formulation that are used to manage the DERs and VPP are discussed and categorized systematically. Finally, the factors which affect the integration of DERs and prosumers to the VPP are identified.