AbstractMicroalgae offer great promise to contribute a significant portion of the renewable fuels that will be required by the Renewable Fuels Standard described in the 2007 Energy Independence and Security Act of the United States. Algal biofuels would be based mainly on the high lipid content of the algal cell and thus would be an ideal feedstock for high energy density transportation fuels, such as biodiesel as well as green diesel, green jet fuel and green gasoline. A comprehensive research and development program for the development of algal biofuels was initiated by the US Department of Energy (DoE) more than 30 years ago, and although great progress was made, the program was discontinued in 1996, because of decreasing federal budgets and low petroleum costs. Interest in algal biofuels has been growing recently due to increased concern over peak oil, energy security, greenhouse gas emissions, and the potential for other biofuel feedstocks to compete for limited agricultural resources. The high productivity of algae suggests that much of the US transportation fuel needs can be met by algal biofuels at a production cost competitive with the cost of petroleum seen during the early part of 2008. Development of algal biomass production technology, however, remains in its infancy. This perspective provides a brief overview of past algal research sponsored by the DoE, the potential of microalgal biofuels and a discussion of the technical and economic barriers that need to be overcome before production of microalgal‐derived diesel‐fuel substitutes can become a large‐scale commercial reality. Published in 2009 by John Wiley & Sons, Ltd.