Contamination of the biosphere by heavy metals has been rising, due to accelerated anthropogenic activities, and is nowadays, a matter of serious global concern. Removal of such inorganic pollutants from aquatic environments via biological processes has earned great popularity, for its cost-effectiveness and high efficiency, compared to conventional physicochemical methods. Among candidate organisms, microalgae offer several competitive advantages; phycoremediation has even been claimed as the next generation of wastewater treatment technologies. Furthermore, integration of microalgae-mediated wastewater treatment and bioenergy production adds favorably to the economic feasibility of the former process—with energy security coming along with environmental sustainability. However, poor biomass productivity under abiotic stress conditions has hindered the large-scale deployment of microalgae. Recent advances encompassing molecular tools for genome editing, together with the advent of multiomics technologies and computational approaches, have permitted the design of tailor-made microalgal cell factories, which encompass multiple beneficial traits, while circumventing those associated with the bioaccumulation of unfavorable chemicals. Previous studies unfolded several routes through which genetic engineering-mediated improvements appear feasible (encompassing sequestration/uptake capacity and specificity for heavy metals); they can be categorized as metal transportation, chelation, or biotransformation, with regulation of metal- and oxidative stress response, as well as cell surface engineering playing a crucial role therein. This review covers the state-of-the-art metal stress mitigation mechanisms prevalent in microalgae, and discusses putative and tested metabolic engineering approaches, aimed at further improvement of those biological processes. Finally, current research gaps and future prospects arising from use of transgenic microalgae for heavy metal phycoremediation are reviewed.