Urbanization is a revolutionary and necessary step for the development of nations. However, with development emanates its drawback i.e., generation of a huge amount of wastewater. The existence of diverse types of nutrient loads and toxic compounds in wastewater can reduce the pristine nature of the ecosystem and adversely affects human and animal health. The conventional treatment system reduces most of the chemical contaminants but their removal efficiency is low. Thus, microalgae-based biological wastewater treatment is a sustainable approach for the removal of nutrient loads from wastewater. Among various microalgae, Tetraselmis sp. is a robust strain that can remediate industrial, municipal, and animal-based wastewater and reduce significant amounts of nutrient loads and heavy metals. The produced biomass contains lipids, carbohydrates, and pigments. Among them, carbohydrates and lipids can be used as feedstock for the production of bioenergy products. Moreover, the usage of a photobioreactor (PBR) system improves biomass production and nutrient removal efficiency. Thus, the present review comprehensively discusses the latest studies on Tetraselmis sp. based wastewater treatment processes, focusing on the use of different bioreactor systems to improve pollutant removal efficiency. Moreover, the applications of Tetraselmis sp. biomass, advancement and research gap such as immobilized and co-cultivation have also been discussed. Furthermore, an insight into the harvesting of Tetraselmis biomass, effects of physiological, and nutritional parameters for their growth has also been provided. Thus, the present review will broaden the outlook and help to develop a sustainable and feasible approach for the restoration of the environment.