The cumulative reduction of fossil fuels, fuel security concerns, climate change, and economic challenges has driven the need for replacement biofuels. An eco-friendly, sustainable energy alternative is algal biofuels that are capable of generating hydrogen, methane, and liquid fuels such as biodiesel and bioethanol. Algae, a third-generation renewable biomass source, surpasses terrestrial crops by thriving on nonarable land by using wastewater while yielding increased concentrations of lipid and carbohydrates at accelerated growth rates. Despite the accumulated lipid composition and notable algal growth rate promoting biofuel production, the associated downstream costs are substantial for manufacturing ethanol from algal sources. This chapter examines different techniques for extracting lipids from algal biomass, encompassing mechanical methods, solvent-based approaches, and supercritical fluid extraction. Following this, transesterification converts these lipids into biodiesel, whereas the fermentation of the residual carbohydrates produces bioethanol. Additionally, this chapter depicts the biochemical processes related to lipid metabolism and growth condition optimization to promote lipid accumulation in algae. Under certain growth conditions such as anaerobiosis or sulfur deprivation, hydrogenases then act as essential enzymes in the photobiological processes for hydrogen generation in algae. Methane production, conversely, relies on the anaerobic digestion of algal biomass, wherein complex organic materials are decomposed by microbial communities to yield biogas, predominantly methane. Nonetheless, the viability and sustainability of algae-based biofuel depend on the reduction of increased production costs, low productivity yields, and adverse environmental consequences. This study assesses the technological and financial viability of large-scale biodiesel production from algae and evaluates the commercial sustainability of algal biofuels. Key considerations include significant production costs, scalability challenges, and the processing technologies involved. Advances in genetic engineering and bioprocess optimization having resulted in much higher yields and efficiency will also be reviewed. This chapter highlights the promising role of algal lipids as a versatile feedstock for renewable energy generation, supporting the shift toward a more sustainable and eco-friendly future.