Algae’s potential for medicinal use is dependent on their biochemical diversity, which is influenced by a variety of elements such as climate, temperature, light intensity, the density of biomass, salinity levels, water velocity, and the accessibility of nutrients. Bioactive chemicals found in algae are numerous and possess significant potential for application as medicines. Numerous bioactive compounds produced by microalgae are beneficial to the health of humans as well as animals. The primary classes of chemicals that exhibit pharmacological action in algae have been emphasised regardless of their diversity. These include polyunsaturated fatty acids, polysaccharides, polyphenols, pigments, alkaloids, and terpenoids. The market for medicines based on naturally occurring chemicals is expanding globally, and there is now considerable interest in the use of various algae components in the treatment of illnesses prevalent in society. Pharmaceutical companies and medical researchers currently focus primarily on three substances for use in drug development: a potential treatment for AIDS, tumours, and lung cancer from a species of Byopsis, antifouling agents derived from Delisea pulchra and antiviral agents in the form of sulphur-based polysaccharides. Thus, the prospective uses of compounds obtained from algae in medicine, research, and pharmaceuticals are discussed.