Microalgae represent an exceptionally diverse but highly specialized group of micro-organisms adapted to various ecological habitats. Many microalgae have the ability to produce substantial amounts (e.g. 20–50% dry cell weight) of triacylglycerols (TAG) as a storage lipid under photo-oxidative stress or other adverse environmental conditions. Fatty acids, the building blocks for TAGs and all other cellular lipids, are synthesized in the chloroplast using a single set of enzymes, of which acetyl CoA carboxylase (ACCase) is key in regulating fatty acid synthesis rates. However, the expression of genes involved in fatty acid synthesis is poorly understood in microalgae. Synthesis and sequestration of TAG into cytosolic lipid bodies appear to be a protective mechanism by which algal cells cope with stress conditions, but little is known about regulation of TAG formation at the molecular and cellular level. While the concept of using microalgae as an alternative and renewable source of lipid-rich biomass feedstock for biofuels has been explored over the past few decades, a scalable, commercially viable system has yet to emerge. Today, the production of algal oil is primarily confined to high-value specialty oils with nutritional value, rather than commodity oils for biofuel. This review provides a brief summary of the current knowledge on oleaginous algae and their fatty acid and TAG biosynthesis, algal model systems and genomic approaches to a better understanding of TAG production, and a historical perspective and path forward for microalgae-based biofuel research and commercialization.