Diatoms, considered as one of the most diverse and largest groups of algae, can provide the means to reach a sustainable production of petrochemical substitutes and bioactive compounds. However, a prerequisite to achieving this goal is to increase the solar-to-biomass conversion efficiency of photosynthesis, which generally remains less than 5% for most photosynthetic organisms. We have developed and implemented a rapid and effective approach, herein referred to as intracellular spectral recompositioning (ISR) of light, which, through absorption of excess blue light and its intracellular emission in the green spectral band, can improve light utilization. We demonstrate that ISR can be used chemogenically, by using lipophilic fluorophores, or biogenically, through the expression of an enhanced green fluorescent protein (eGFP) in the model diatom Phaeodactylum tricornutum. Engineered P. tricornutum cells expressing eGFP achieved 28% higher efficiency in photosynthesis than the parental strain, along with an increased effective quantum yield and reduced nonphotochemical quenching (NPQ) induction levels under high-light conditions. Further, pond simulator experiments demonstrated that eGFP transformants could outperform their wild-type parental strain by 50% in biomass production rate under simulated outdoor sunlight conditions. Transcriptome analysis identified up-regulation of major photosynthesis genes in the engineered strain in comparison with the wild type, along with down-regulation of NPQ genes involved in light stress response. Our findings provide a proof of concept for a strategy of developing more efficient photosynthetic cell factories to produce algae-based biofuels and bioactive products.