The present study illustrates optimization and synergetic potential of alga for lipid production and remediation of Dairy industry wastewater (DIWW) through response surface methodology (RSM). Maximum lipid productivity of 34.41% was obtained under 50% DIWW supplemented with 0 mg L nitrate (NO), and 50 mg L phosphate (PO). While maximum biomass productivity (1.54 g L) was obtained with 50% DIWW supplemented with 100 mg L NO, and 50 mg L, PO. Maximum removal of COD (43.47%), NO (99.80%) and PO (98.24%) was achieved with 8th run (75% DIWW, 150 mg L NO, 75 mg L PO), 15th run (50% DIWW, 0 mg L NO, 50 mg L, PO) followed by 1st run (25% DIWW, 50 mg L NO, and 25 mg L, PO), respectively. Lipid (bio-oil) obtained from 15th run of experiment was converted in biodiesel through base catalyze transesterification process. Fatty acid methyl ester (FAME) analysis of biodiesel confirmed the presence of major fatty acids in grown in DIWW were C11:0, C14:0, C16:0, C16:1, C18:1 and C18:2. Results of study clearly demonstrate enhanced growth and lipid accumulation by in surplus PO and limitation of NO sources with DIWW and its suitability as potential alternative for commercial utilization.