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There is growing evidence that bioactive fatty acids (BFAs), including eicosapentaenoic acid (EPA; 20:5–3), docosahexaenoic acid (DHA; 22:6–3), and conjugated fatty acids offer multiple biological benefits and constitute ingredients in functional food development. Despite their potential, novel and alternative/nonconventional sources with unique bioactive properties to meet growing demand remain largely unexplored, poorly characterized, and their effects are not well understood. We systematically reviewed the literature to identify studies on alternative sources of BFAs, their functions, extraction, and application in the food and nutraceutical industry. Twenty studies delved into alternate sources such as plants, bacteria, and algae. Six studies found EPA and DHA as the dominant FA in algal sources, while ten studies reported several BFAs from plant sources. Five studies assessed the health benefits of docosapentaenoic acid (DPA), arachidonic acid (ARA), EPA, γ‐linolenic acid (GLA), and linoleic acid (LA). Eleven studies compared the quality of oil recovered by green solvents, pressurized liquid, supercritical fluid, and assisted extraction methods. Three studies assessed the effects of assisted extraction methods and reported that these approaches improved oil yield and quality, but the findings may have limited applicability to other lipid sources. The quality of nonconventional lipids largely depends on extraction techniques. Four studies suggested methods like 1D and 2D NMR spectroscopy, LC‐MS/MS; however, their analytical differences make accurate comparison inadequate. Five studies found that the incorporation of algal and seafood biolipids during product development increased EHA and DHA contents.