The US Energy Independence and Security Act of 2007 fuels standard mandates the production of 36 billion gallons (1.363 × 1011 L) of renewable fuels by the year 2022. Similar production goals have been set up in many other countries worldwide. Among biofuels, algae hold the potential to meet the standard, especially due to the high (15–300 times) oil yield per acre as compared to traditional biofuel crops (corn, soybean, etc.). The leading algae biofuel research is pointing toward cost-efficiency involved in integrating algae production with wastewater treatment. Wastewaters (municipal, industrial, and agricultural – including the effluent from farm biodigesters) contain organic material that algae can digest and utilize the nutrients (mainly nitrogen and phosphorus), which otherwise pose a threat to natural water bodies. Environmental benefits of algae production coupled with wastewater treatment revenue can possibly offset algae biofuel production costs; however, growing algae for biofuels (especially oils) in wastewater media has proven challenging. We explore some of these issues and challenges.