With the increase in the world’s population, demand for food and other products is continuously rising. This has put a lot of pressure on the agricultural sector. To fulfill these demands, the utilization of chemical fertilizers and pesticides has also increased. Consequently, to overcome the adverse effects of agrochemicals on our environment and health, there has been a shift towards organic fertilizers or other substitutes, which are ecofriendly and help to maintain a sustainable environment. Microalgae have a very high potential of carbon dioxide (CO2) capturing and thus, help in mitigating the greenhouse effect. It is the most productive biological system for generating biomass. The high growth rate and higher photosynthetic efficiency of the algal species compared to the terrestrial plants make them a wonderful alternative towards a sustainable environment. Moreover, they could be cultivated in photobioreactors or open ponds, which in turn reduce the demand for arable land. Biochar derived from algae is high in nutrients and exhibits the property of ion exchange. Therefore, it can be utilized for sustainable agriculture by partial substituting the chemical fertilizers that degrade the fertility of the soil in the long run. This review provides a detailed insight on the properties of algal biochar as a potential fertilizer for sustainable agriculture. Application of algal biochar in bio-refinery and its economic aspects, challenges faced and future perspective are also discusses in this study.