Microalgae biofuel represents one of the most promising renewable energy solutions for the transportation sector due to its exceptional productivity, high oil content, and minimal land requirements. Microalgae are microscopic photosynthetic organisms capable of converting sunlight, water, and carbon dioxide into biomass at rates far superior to terrestrial plants. Many species produce large quantities of lipids, which can be extracted and converted into biodiesel suitable for modern diesel engines without major modifications. Cultivation systems include open ponds, which are low-cost but vulnerable to contamination, and photobioreactors, which offer high efficiency but are expensive. After cultivation, microalgae biomass is harvested, dried, and processed through lipid extraction and transesterification to produce biodiesel. The environmental advantages of microalgae biofuel are significant. Microalgae grow on non-arable land using saline or wastewater, eliminating competition with food crops. They absorb large amounts of carbon dioxide, making their lifecycle near carbon-neutral. Fuel properties such as high cetane numbers, low sulfur content, and compatibility with current fuel infrastructure make algal biodiesel suitable for immediate adoption in transportation. However, the technology faces major barriers. High production costs, energy-intensive harvesting, and expensive photobioreactor systems currently limit economic viability. Large quantities of water and nutrients are required, and sustained CO₂ supply is essential for high productivity. Operational challenges such as contamination, climate sensitivity, and complex logistics also hinder commercialization. Despite these limitations, ongoing research—particularly in genetic engineering, biorefinery strategies, low-energy harvesting methods, and integration with wastewater treatment—continues to improve feasibility. With strong policy support and technological advancements, microalgae biofuel has the potential to become a major renewable fuel. It is especially promising for heavy-duty vehicles, aviation, and ships, where electrification remains challenging. Microalgae biofuel may ultimately play a key role in reducing carbon emissions and supporting future global energy sustainability.