This paper presents an overview on the potentiality of microalgae with particular emphasis as a sustainable renewable energy source for biodiesel. One of the most important dilemmas of the modern world is to supply maximal amount of energy with minimal environmental impact. The total energy demand of our planet is increasing with population growth whereas the fossil fuel reserves are dwindling swiftly. Biodiesel produced from biomass is widely considered to be one of the most sustainable alternatives to fossil fuels and a viable means for energy security and environmental and economic sustainability. But as a large area of arable land is required to cultivate biodiesel producing terrestrial plants, it may lead towards food scarcity and deforestation. Microalgae have a number of characteristics that allow the production concepts of biodiesel which are significantly more sustainable than their alternatives. Microalgae possess high biomass productivity, oils with high lipid content, fast growth rates, possibility of utilizing marginal and infertile land, capable of growing in salt water and waste streams, and capable of utilizing solar light and CO2 gas as nutrients