Rapid urbanization, industrialization, and agricultural activities disrupt the aquatic ecosystem by producing harmful pollutants like heavy metals and different harmful chemicals that accumulate inside the human body and produce different health hazards. Recently, algae gained focus due to it can be used for wastewater treatment and biofuel production, and this unique nature makes it versatile. Algal-based phycoremediation is a cost-effective bioremediation technique that removes heavy metals and other pollutants from the wastewater. Along with wastewater treatment, algae are a suitable choice for biofuel production. In this review, we discuss the different phycoremediation strategies like open pond method, algal mat, rhizofiltration, and constructed wetlands, along with some basic mechanisms like ion exchange, absorption and chelation. Besides this, we also discuss the biofuel production from the algae and highlight some processes like transesterification, pyrolysis, and gasification. Although these processes are on a small scale, more research is needed for large-scale applications. This integrated technology could be a suitable future plan that transforms wastewater from an environmental burden to a renewable source of energy.