One potential third-generation feedstock for renewable biofuels is algae. They efficiently trap CO2, yield large quantities without interfering with food supplies, and can be cultivated on non-arable land using salt or wastewater. Both macroalgae, which are high in proteins and carbohydrates, and microalgae, which grow quickly and have a high-lipid content, enable the production of a range of biofuels, including advanced fuels, biodiesel, and bioethanol. Every cultivation technique has pros and cons of its own, ranging from inexpensive open ponds to controlled photobioreactors. Energy-intensive post-cultivation processes like harvesting, dewatering, and biomass conversion have an impact on overall viability. Commercialization is currently hampered by both technical and economic obstacles, such as high production costs and scaling issues. Long-term and economical algae biofuel production is becoming possible, though, thanks to developments in genetic engineering, waste stream integration, new reactor designs, and process optimization.