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There is a growing need for sustainable food alternatives to address the inadequacy of traditional food crops in meeting nutritional demands. Microalgae have come across as a promising solution owing to their capacity for providing both nutrition and health benefits while offering environmental advantages. This chapter delves into recent innovations in microalgal processing for nutraceutical applications while addressing safety concerns and identifying the current market outlook. Various microalgal species have been identified for their rich nutritional content and bioactive compounds such as polyunsaturated fatty acids, carotenoids, and amino acids. These compounds have demonstrated diverse health-promoting properties, including anti-inflammatory, antioxidant, neuroprotective, and cardioprotective effects. Despite the potential of microalgae in addressing food scarcity and environmental challenges, obstacles such as high operational costs due to rigorous extraction procedures and underdeveloped commercialization strategies persist. However, recent advancements in microalgal processing aim to overcome these challenges, potentially making nutraceutical production from microalgae economically feasible.