The escalating global challenge of wastewater management necessitates sustainable and cost-effective solutions beyond conventional methods, which are energy-intensive and often inefficient in nutrient recovery. This chapter provides a comprehensive analysis of phycoremediation, an innovative biotechnology leveraging microalgae for treating diverse wastewater effluents while simultaneously generating valuable biomass. We delve into various wastewater types municipal, agricultural, and industrial highlighting how their distinct nutrient profiles influence microalgal growth and biomass productivity. Key environmental factors, including light, temperature, pH, and nutrient availability, are explored for their critical role in optimizing microalgal cultivation. The chapter further details the biochemical characteristics of microalgal biomass through proximate and ultimate analyses, revealing its rich macromolecular composition (proteins, carbohydrates, lipids, and pigments) that dictates its valorization potential for applications like biofuels, animal feed, and nutraceuticals. We elucidate the intricate mechanisms of microalgal wastewater treatment, involving efficient nutrient bioadsorption, carbon dioxide sequestration, and oxygen release, alongside the microalgae’s adaptive physiological responses to pollutant stress. Subsequent sections discuss the practical reuse applications of microalgae-treated water for agricultural irrigation and industrial processes, emphasizing adherence to water quality standards. Finally, the inherent challenges, such as wastewater variability, contamination risks, and the need for robust strain selection, are addressed, paving the way for future prospects in advanced cultivation technologies and process integration toward a truly circular bioeconomy.