As the global population steadily rises, a pressing challenge emerges: the diminishing availability of agricultural land. This situation has intensified the search for innovative, cost-effective and renewable food sources. In this context, microalgae have surfaced as a promising alternative to conventional food crops, offering a viable solution to the food supply dilemma. Extensive research has revealed that microalgae are rich in diverse bioactive compounds and vibrant, naturally occurring pigments. These include chlorophylls, carotenoids and phycobiliproteins, each contributing to the aesthetic appeal of these organisms and their remarkable nutritional and medicinal benefits. The pigments found in microalgae boast an impressive array of health properties, such as antioxidant, antimicrobial, anti-inflammatory, anticarcinogenic, antihypertensive, antilipidemic and antidiabetic activities. As awareness of these benefits grows, so too does the demand for these pigments, positioning them as an exciting opportunity for innovation in the pharmaceutical, nutraceutical and functional food sectors. This work aims to explore the various types of microalgae, their health-related bioactivities and the methods for their extraction and purification. Moreover, it will also highlight their potential applications as functional foods and examine their promising commercial prospects within the pharmaceutical and nutritional industries.