Globally, nations are trying to address environmental issues such as global warming and climate change, along with the burden of declining fossil fuel reserves. Furthermore, countries aim to reach zero carbon emissions within the existing and rising global energy crisis. Therefore, bio-based alternative sustainable feedstocks are being explored for producing bioenergy. One such renewable energy resource is microalgae; these are photosynthetic microorganisms that grow on non-arable land, in extreme climatic conditions, and have the ability to thrive even in sea and wastewater. Microalgae have high photosynthetic efficiencies and biomass productivity compared to other terrestrial plants. Whole microalgae biomass or their extracted metabolites can be converted to various biofuels such as bioethanol, biodiesel, biocrude oil, pyrolytic bio-oil, biomethane, biohydrogen, and bio jet fuel. However, several challenges still exist before faster and broader commercial application of microalgae as a sustainable bioenergy feedstock for biofuel production. Selection of appropriate microalgal strains, development of biomass pre-concentrating techniques, and utilization of wet microalgal biomass for biofuel production, coupled with an integrated biorefinery approach for producing value-added products, could improve the environmental sustainability and economic viability of microalgal biofuel. This article will review the current status of research on microalgal biofuels and their future perspective.