<p>Textile wastewater is known to possess high color intensity, intricate structures of dyes, salinity, and a high level of chemical oxygen demand. Such wastewater is difficult to treat using conventional biological treatment methods. Dyes are known to persist in water bodies and are recalcitrant in nature, especially azo dyes, which are known to interfere with light penetration in water bodies. Such dyes are a major threat to water resources and human health. In recent times, phycoremediation using microalgae is being considered a promising and economically viable method of treating textile wastewater while producing a valuable resource. In this paper, a structured review of microalgae in textile wastewater treatment is provided. Literature on textile wastewater treatment using microalgae and removal of dyes from textile wastewater using microalgae is reviewed. Scientific literature published in recent times (2000 to 2024) is collected from various scientific databases such as Scopus, Web of Science, and Google Scholar using keywords such as microalgae, textile wastewater treatment, and phycoremediation. This review covers the toxic effects of textile dyes and their environmental impacts, methods of removal of dyes by microalgae (biosorption, bioaccumulation, and biodegradation), and the effectiveness of different species of algae in TWW treatment. Emphasis is placed on the challenges associated with TWW treatment, which are distinct from those of other wastewaters. These challenges include photoinhibition by colored dyes, high salinity levels, variable nutrient composition, and stability of synthetic dyes. Moreover, the use of photobioreactors and open ponds in cultivating algae for TWW treatment is explored, in addition to biomass exploitation for biofuel production. The gaps in TWW treatment using microalgae are also presented, which include pilot-scale studies, effective strains of algae that are resistant to variable TWW composition, and harvesting technologies for scaling up the process.</p>