AbstractSustainable alternatives to fossil fuels are urgently needed to avoid severe climate impacts and further environmental degradation. Microalgae are one of the most productive crops globally and do not need to compete for arable land or freshwater resources. Hence, they may become a promising, more sustainable cultivation alternative for the large‐scale production of biofuels provided that substantial reductions are achieved in their production costs. In this study, we identify the most suitable areas globally for siting microalgal farms for biodiesel production that maximize profitability and minimize direct competition with food production and direct impacts on biodiversity, based on a spatially explicit multiple‐criteria decision analysis. We further explore the relationships between microalgal production, agricultural value, and biodiversity, and propose several solutions for siting microalgal production farms, based on current and future targets in energy production using integer linear programming. If using seawater for microalgal cultivation, biodiesel production could reach 5.85 × 1011 L/year based on top suitable lands (i.e., between 13% and 16% of total transport energy demands in 2030) without directly competing with food production and areas of high biodiversity value. These areas are particularly abundant in the dry coasts of North and East Africa, the Middle East, and western South America. This is the first global analysis that incorporates economic and environmental feasibility for microalgal production sites. Our results can guide the selection of best locations for biofuel production using microalgae while minimizing conflicts with food production and biodiversity conservation.