Phyconanotechnology, an emerging interdisciplinary field combining nanotechnology and phycology, investigates how macro- and microalgae can be utilized to manipulate and create materials at the nanoscale. Leveraging algae’s rapid growth, diverse biochemical makeup, and natural photosynthetic capabilities, this field explores their potential as “biofactories” for synthesizing and assembling nanomaterials. Recent advancements in biotechnology and nanotechnology have enabled more effective isolation, characterization, and utilization of nanoparticles derived from algae and cyanobacteria. Despite the promising applications of phyconanoparticles in agriculture, energy production, medicine, and environmental conservation, significant challenges remain, including inconsistent yields, nanoparticle size and shape variations, and scaling-up issues. This chapter reviews the historical development, key advancements, and current challenges of phyconanotechnology. It highlights the field’s potential to offer sustainable solutions in various industries and outlines future research directions needed to overcome existing limitations and enhance the practical applications of phyconanoparticles.