Biofuels hold particular promise as these can replace fossil fuels. Algae, in particular, are envisioned as a sustainable source of third-generation biofuels. Algae also produce several low volume high-value products, which enhance their prospects of use in a biorefinery. Bio-electrochemical systems such as microbial fuel cell (MFC) can be used for algae cultivation and bioelectricity production. MFCs find applications in wastewater treatment, CO sequestration, heavy metal removal and bio-remediation. Oxidation of electron donor by microbial catalysts in the anodic chamber gives electrons (reducing the anode), CO and electrical energy. The electron acceptor at the cathode can be oxygen/NO /NO /metal ions. However, the need for a continuous supply of terminal electron acceptor in the cathode can be eliminated by growing algae in the cathodic chamber, as they produce enough oxygen through photosynthesis. On the other hand, conventional algae cultivation systems require periodic oxygen quenching, which involves further energy consumption and adds cost to the process. Therefore, the integration of algae cultivation and MFC technology can eliminate the need of oxygen quenching and external aeration in the MFC system and thus make the overall process sustainable and a net energy producer. In addition to this, the CO gas produced in the anodic chamber can promote the algal growth in the cathodic chamber. Hence, the energy and cost invested for CO transportation in an open pond system can be saved. In this context, the present review outlines the bottlenecks of first- and second-generation biofuels along with the conventional algae cultivation systems such as open ponds and photobioreactors. Furthermore, it discusses about the process sustainability and efficiency of integrating algae cultivation with MFC technology in detail.