Algae are without doubt the most productive photosynthetic organisms on Earth; they are highly efficient in converting CO₂ and nutrients into biomass. These abilities can be exploited by culturing microalgae from wastewater and flue gases for effective wastewater reclamation. Algae are known to remove nitrogen and phosphorus as well as several organic contaminants including pharmaceuticals from wastewater. Biomass production can even be enhanced by the addition of CO₂ originating from flue gases. The algal biomass can then be used as a raw material to produce bioenergy; depending on its composition, various types of biofuels such as biodiesel, biogas, bioethanol, biobutanol or biohydrogen can be obtained. However, algal biomass generated in wastewater and flue gases also contains contaminants which, if not degraded, will end up in the ashes. In this review, the current knowledge on algal biomass production in wastewater and flue gases is summarized; special focus is given to the algal capacity to remove contaminants from wastewater and flue gases, and the consequences when converting this biomass into different types of biofuels.