There are a variety of point and non-point sources via which the contaminants might reach aquatic bodies; nonetheless, wastewater discharge continues to be a significant channel. By lowering the levels of nitrogen and phosphorus in wastewater discharge, industrialized and developing countries alike are concentrating on enhancing the environmental condition of water supplies. In recent times, there has been a renewed interest in using mixotrophic microalgae to treat wastewater. Although wastewater treatment is a successful method for reducing toxins, it is costly and calls for a sustainable and environmentally acceptable option to lower treatment expenses. Through biosorption, bioaccumulation, and intracellular breakdown, algae have just surfaced as a possible cost-effective way to remediate harmful contaminants. As a result, there are better ways to recover environmental resources and implement sustainable initiatives before releasing the effluent into the environment. Above all else, algae have the makings of a valuable feedstock for a range of industrial uses, including the creation of biofuels. Researchers are working hard to use algae’s potential to make biofuels, food additives, pharmaceuticals, and biofertilizers. The focus of this investigation was the potential of algae as a source of essential industrial precursors, along with the methods by which algae participate in wastewater treatment and energy recovery systems. Hence, this review paper mainly focuses on algae, including their cellular composition, that can be used in algal biotechnology for municipal wastewater treatment.