In recent years, the development of healthier foods, richer in nutraceutical or functional compounds, has been in great demand. Microalgae are attracting increasing attention, as their incorporation in foods and beverages can be a promising strategy to develop sustainable foods with improved nutritional profiles and a strong positive impacts on health. Despite the increasing market demand in plant-based foods, the popularity of fermented dairy foods has increased in the recent years since they are a source of microorganisms with health-promoting effects. In this context, the incorporation of microalgae in cheeses, fermented milks and other dairy products represents an interesting approach towards the development of innovative and added-value hybrid products based on animal proteins and enriched with vegetable origin ingredients recognized as extremely valuable sources of bioactive compounds. The effect of the addition of microalgal biomass (Chlorella vulgaris, Arthrospira platensis, Pavlova lutheri, and Diacronema vlkianum, among others) and its derivates on the physicochemical composition, colorimetric and antioxidant properties, texture and rheology behavior, sensory profile, and viability of starter cultures and probiotics in yogurt, cheese and ice cream is discussed in the current work. This review of the literature on the incorporation of microalgae in dairy products aims to contribute to a better understanding of the potential use of these unique food ingredients in the development of new sustainable products and of their beneficial effects on health. Considering the importance of commercialization, regulatory issues about the use of microalgae in dairy products are also discussed.