The rapid rise in industrialization and urbanization has placed remarkable pressure on global freshwater resources, while the discharge of untreated or inadequately treated wastewater continues to pose major environmental and health concerns. In this context, the present chapter explores the potential of microalgae as a sustainable alternative to conventional wastewater treatment technologies. Conventional physicochemical approaches are effective, but they are limited by high operational costs, energy-intensive processes, and the generation of secondary pollutants. In contrast, microalgae-based phycoremediation provides a multifunctional strategy that integrates pollutant removal with resource recovery. Further, the chapter discusses the mechanisms by which microalgae assimilate nutrients, biotransform and bioaccumulate heavy metals, reduce organic load, and suppress the growth of pathogenic microorganisms. Different cultivation systems, including open ponds and closed photobioreactors, are discussed in terms of their applicability, efficiency, and limitations for wastewater treatment. Furthermore, the valorization of wastewater-grown microalgal biomass into biofuels, biofertilizers, bioplastics, and animal feed is highlighted, emphasizing its role in advancing circular bioeconomy approaches. Overall, the chapter provides a comprehensive overview of the advantages, challenges, and prospects of integrating microalgal phycoremediation into sustainable wastewater management systems.