SummaryLipid degradation processes are important in microalgae because survival and growth of microalgal cells under fluctuating environmental conditions require permanent remodeling or turnover of membrane lipids as well as rapid mobilization of storage lipids. Lipid catabolism comprises two major spatially and temporarily separated steps, namely lipolysis, which releases fatty acids and head groups and is catalyzed by lipases at membranes or lipid droplets, and degradation of fatty acids to acetyl‐CoA, which occurs in peroxisomes through the β‐oxidation pathway in green microalgae, and can sometimes occur in mitochondria in some other algal species. Here we review the current knowledge on the enzymes and regulatory proteins involved in lipolysis and peroxisomal β‐oxidation and highlight gaps in our understanding of lipid degradation pathways in microalgae. Metabolic use of acetyl‐CoA products via glyoxylate cycle and gluconeogenesis is also reviewed. We then present the implication of various cellular processes such as vesicle trafficking, cell cycle and autophagy on lipid turnover. Finally, physiological roles and the manipulation of lipid catabolism for biotechnological applications in microalgae are discussed.