Algae have a great potential source of biofuels and also have unique importance to reduce gaseous emissions, greenhouse gases, climatic changes, global warming receding of glaciers, rising sea levels and loss of biodiversity. The microalgae, like Scenedesmus obliquus, Neochloris oleabundans, Nannochloropsis sp., Chlorella emersonii, and Dunaliella tertiolecta have high oil content. Among the known algae, Scenedesmus obliquus is one of the most potential sources for biodiesel as it has adequate fatty acid (linolenic acid) and other polyunsaturated fatty acids. Bio—ethanol is already in the market of United States of America and Europe as an additive in gasoline. Bio—hydrogen is the cleanest biofuel and extensive efforts are going on to bring it to market at economical price. This review highlights recent development and progress in the field of algae as a potential source of biofuel.