Type-2 diabetes mellitus (T2DM) is a major systemic disease which involves impaired pancreatic function and currently affects half a billion people worldwide. Diet is considered the cornerstone to reduce incidence and prevalence of this disease. Algae contains fiber, polyphenols, ω-3 PUFAs, and bioactive molecules with potential antidiabetic activity. This review delves into the applications of algae and their components in T2DM, as well as to ascertain the mechanism involved (e.g., glucose absorption, lipids metabolism, antioxidant properties, etc.). PubMed, and Google Scholar databases were used. Papers in which whole alga, algal extracts, or their isolated compounds were studied in in vitro conditions, T2DM experimental models, and humans were selected and discussed. This review also focuses on meat matrices or protein concentrate-based products in which different types of alga were included, aimed to modulate carbohydrate digestion and absorption, blood glucose, gastrointestinal neurohormones secretion, glycosylation products, and insulin resistance. As microbiota dysbiosis in T2DM and metabolic alterations in different organs are related, the review also delves on the effects of several bioactive algal compounds on the colon/microbiota-liver-pancreas-brain axis. As the responses to therapeutic diets vary dramatically among individuals due to genetic components, it seems a priority to identify major gene polymorphisms affecting potential positive effects of algal compounds on T2DM treatment.