Biofuel-bioenergy production has generated intensive interest due to increased concern regarding limited petroleum-based fuel supplies and their contribution to atmospheric CO(2) levels. Biofuel research is not just a matter of finding the right type of biomass and converting it to fuel, but it must also be economically sustainable on large-scale. Several aspects of cyanobacteria and microalgae such as oxygenic photosynthesis, high per-acre productivity, non-food based feedstock, growth on non-productive and non-arable land, utilization of wide variety of water sources (fresh, brackish, seawater and wastewater) and production of valuable co-products along with biofuels have combined to capture the interest of researchers and entrepreneurs. Currently, worldwide biofuels mainly in focus include biohydrogen, bioethanol, biodiesel and biogas. This review focuses on cultivation and harvesting of cyanobacteria and microalgae, possible biofuels and co-products, challenges for cyanobacterial and microalgal biofuels and the approaches of genetic engineering and modifications to increase biofuel production. (C) 2011 Elsevier Ltd. All rights reserved.