Abstract Background Microalgae are gaining importance as sustainable production hosts in the fields of biotechnology and bioenergy. A robust biomass accumulating strain of the genus Monoraphidium (SAG 48.87) was investigated in this work as a potential feedstock for biofuel production. The genome was sequenced, annotated, and key enzymes for triacylglycerol formation were elucidated. Results Monoraphidium neglectum was identified as an oleaginous species with favourable growth characteristics as well as a high potential for crude oil production, based on neutral lipid contents of approximately 21% (dry weight) under nitrogen starvation, composed of predominantly C18:1 and C16:0 fatty acids. Further characterization revealed growth in a relatively wide pH range and salt concentrations of up to 1.0% NaCl, in which the cells exhibited larger structures. This first full genome sequencing of a member of the Selenastraceae revealed a diploid, approximately 68 Mbp genome with a G + C content of 64.7%. The circular chloroplast genome was assembled to a 135,362 bp single contig, containing 67 protein-coding genes. The assembly of the mitochondrial genome resulted in two contigs with an approximate total size of 94 kb, the largest known mitochondrial genome within algae. 16,761 protein-coding genes were assigned to the nuclear genome. Comparison of gene sets with respect to functional categories revealed a higher gene number assigned to the category “carbohydrate metabolic process” and in “fatty acid biosynthetic process” in M. neglectum when compared to Chlamydomonas reinhardtii and Nannochloropsis gaditana, indicating a higher metabolic diversity for applications in carbohydrate conversions of biotechnological relevance. Conclusions The genome of M. neglectum, as well as the metabolic reconstruction of crucial lipid pathways, provides new insights into the diversity of the lipid metabolism in microalgae. The results of this work provide a platform to encourage the development of this strain for biotechnological applications and production concepts.