Alginates are linear anionic polysaccharides, which are well-known for their biocompatible, nontoxic, and biodegradable nature. The polymer consists of alternating units of β-(1 → 4)-linked D-mannuronic acid (M) and α-(1 → 4)-linked L-guluronic acid (G) that have hydroxyl and carboxyl groups as the main functional groups. As a large number of free carboxyl and hydroxyl groups are present in the polymeric chain, the polymer is predominantly hydrophilic. The food and pharmaceutical industries have been the most extensive utilizers of alginates to produce gelling and thickening agents. However, by imparting hydrophobicity to alginates, the range of applications can be widened. Although there are reviews on alginate and its chemical modifications, reviews focusing on hydrophobically associated alginates have not been presented. The commonly used chemical modifications to incorporate hydrophobicity include esterification, Ugi reaction, reductive amination, and graft copolymerization. The hydrophobically modified alginates play an important role in delivery of hydrophobic drugs and pesticides as the modification increases the affinity toward hydrophobic components and helps in their sustained release. Due to their nontoxic and edible nature, they find use in the food industry as emulsion stabilizer to stabilize oil-in-water emulsions and to improve creaming ability. Further, alginate-based materials such as membranes, aerogels, and films are hydrophobically modified to improve their functionality and applicability to water treatment and food packaging. This Review aims to highlight the important chemical modifications and methods that are done to impart hydrophobicity to alginate, and the applications of hydrophobically modified alginates in different sectors ranging from drug delivery to food packaging are discussed.