There are several methods of biomass conversion, including hydrothermal liquefaction (HTL). The implementation of microwave technology in the HTL process is still new, especially on the conversion of marine biomass into bio-crude. In this work, the macroalgae Chaetomorpha sp. was used as the biomass feedstock to produce phenolic-rich bio-oil through microwave-assisted HTL. Chaetomorpha sp. was abundantly found in Malaysia, creating a green tides issue. By utilizing these algae, the green tide issue can be solved and value-added bio-oil is obtained. However, bio-oil from macroalgae has a relatively low heating value, restricting its fuel application. Therefore, it is suggested to be used for bio-polymer synthesis, including bio-based phenol formaldehyde. In this study, the effect of different parameters, such as reaction temperature, preloaded pressure, water-to-algal biomass ratio, and holding time, on both the bio-oil yield and phenolic yield was evaluated. Folin–Ciocalteu method was introduced as the phenolic determination method and the optimal conditions were located by using Response Surface Methodology (RSM). As a results, an optimal biodiesel yield and phenolic yield of 21.47 wt% and 19.22 wt% Gallic Acid Equivalent was obtained at a reaction temperature of 226 °C, 42 bar preloaded pressure and 30:1 water-to-algal biomass ratio after 79 min. Sensitivity analysis also concluded that the water-to-algal biomass ratio is the most influential factor, followed by the preloaded pressure. The FTIR spectrum of the bio-oil produced indicated the presence of different functional group of compounds. In short, Chaetomorpha sp. has been successfully converted into valuable bio-oil through microwave-assisted HTL.