A file can be opened for reading as a stream using WITH-OPEN-FILE macro.
(with-open-file (file #P"test.file")
  (loop for i from 0
        for line = (read-line file nil nil)
        while line
        do (format t "~d: ~a~%" i line)))
; 0: Foobar
; 1: Barfoo
; 2: Quuxbar
; 3: Barquux
; 4: Quuxfoo
; 5: Fooquux
;=> T
The same can be done manually using OPEN and CLOSE.
(let ((file (open #P"test.file"))
      (aborted t))
  (unwind-protect
       (progn
         (loop for i from 0
               for line = (read-line file nil nil)
               while line
               do (format t "~d: ~a~%" i line))
         (setf aborted nil))
    (close file :abort aborted)))
Note that READ-LINE creates a new string for each line. This can be slow. Some implementations provide a variant, which can read a line into a string buffer. Example: READ-LINE-INTO for Allegro CL.