The urgent need to address environmental issues associated with the use of conventional fossil fuels has driven the rapid evolution of the global energy landscape. This review explores the background and significance of 3-G biofuel production, emphasizing the shift towards sustainable alternatives amidst escalating greenhouse gas emissions. While various renewable energy sources have gained prominence, biofuels have emerged as a promising solution for the transportation and industrial sectors, particularly from microalgal biomass. The rationale for focusing on microalgal biomass is based on its technical and environmental advantages. Unlike traditional feedstocks, microalgae boast a high lipid content, enhancing biofuel production efficiency. Their rapid growth rates and efficient carbon dioxide sequestration make microalgae frontrunners in scalable and sustainable biofuel production. This review aims to comprehensively analyze recent breakthroughs in 3-G biofuel production from microalgal biomass, filling gaps in the existing literature. The topics covered included species diversity, cultivation techniques, harvesting, pretreatment, lipid extraction methods, and biofuel production pathways. Genetic engineering, downstream processing, energy-efficient practices, and emerging trends, such as artificial intelligence and cross-disciplinary collaboration, will be explored. This study aims to consolidate recent research findings, identify challenges and opportunities, and guide future directions in microalgal biomass-based biofuel production. By synthesizing unpublished research, this review seeks to advance our knowledge and provide insights for researchers to foster sustainable and efficient 3-G biofuel production.