Microalgae hold promise for the production of sustainable replacement of fossil fuels due to their high growth rates, ability to grow on non-arable land and their high content, under the proper conditions, of high energy compounds that can be relatively easily chemically converted to fuels using existing technology. However, projected large-scale algal production raises a number of sustainability concerns concerning land use, net energy return, water use and nutrient supply. The state-of-the-art of algal production of biofuels is presented with emphasis on some possible avenues to provide answers to the sustainability questions that have been raised. Here, issues concerning algal strains and supply of nutrients for large-scale production are discussed. Since sustainability concerns necessitate the use of wastewaters for supply of bulk nutrients, emphasis is placed on the composition and suitability of different wastewater streams. At the same time, algal cultivation has proven useful in waste treatment processes, and thus this aspect is also treated in some detail.