Discharge of untreated domestic and industrial wastewater into aquatic bodies is posing a serious eutrophication threat, leading to a slow degradation of the water resources. A number of physical, chemical and biological methods have been developed for the treatment of wastewaters; among these, the use of microalgae is considered as a more eco-friendly and economical approaches. Microalgae are versatile organisms which perform multiple roles in the environment—bioremediation of wastewater, gleaning of excess nutrients and in turn, generate valuable biomass which finds applications in the food, biofuel and pharmaceutical industries. They are currently being utilized to reduce the high nutrient load (especially N and P) from wastewaters, which fulfill the growth requirements of microalgae, making it a suitable cultivation medium for biomass production. The present review represents a comprehensive compilation of reports on microalgal diversity of wastewaters, followed by a critical overview of their utilization, suitability and potential in bioremediation vis-a-vis biomass production. This review also emphasizes the superiority of polyalgal and consortial approaches in wastewater treatment, as compared to the use of unialgal inocula, besides providing useful pointers for future research needs in this area.