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In the current global scenario, the world is under a serious dilemma due to the increasing human population, industrialization, and urbanization. The ever-increasing need for fuels and increasing nutritional problems have made a serious concern on the demand for nutrients and renewable and eco-friendly fuel sources. Currently, the use of fossil fuels is creating ecological and economic problems. Microalgae have been considered as a promising candidate for high-value metabolites and alternative renewable energy sources. Microalgae offer several advantages such as rapid growth rate, efficient land utilization, carbon dioxide sequestration, ability to cultivate in wastewater, and most importantly, they do not participate in the food crop versus energy crop dilemma or debate. An efficient microalgal biorefinery system for the production of lipids and subsequent byproduct for nutraceutical applications could well satisfy the need. But, the current microalgal cultivation systems for the production of lipids and nutraceuticals do not offer techno-economic feasibility together with energy and environmental sustainability. This review article has its main focus on the production of lipids and nutraceuticals from microalgae, covering the current strategies used for lipid production and the major high-value metabolites from microalgae and their nutraceutical importance. This review also provides insights on the future strategies for enhanced microalgal lipid production and subsequent utilization of microalgal biomass. Graphical abstract