The goal of this study was to develop a self-settling microalgal consortium in raceway pond reactor (RPR). Experiments were carried out with cultures that developed without additional seeding, but naturally promoted by process conditions in a raceway pond reactor. The changes in microalgal communities and total biomass under nitrogen and phosphorous limitations were studied in both batch and continuous systems. At the steady state batch had the population of 46% Euglena sp., 16% Closterium sp., 14% Chlorella sp., 14% Scenedesmus sp. and 10% Ankistrodesmus sp. with a maximum biomass of 900 mg/L. In order to get self-settling microalgal consortium, the operation was changed to continuous continuous mode with the aid of a specially designed settler for daily harvest and recycling of the biomass. Grazing fauna could be controlled by managing reduced liquid and solid retention time. At steady-state condition, an autofloculating and self-settling consortium was developed which had mainly Fragilaria sp., Scenedesmus sp., and filamentous Ulothrix sp. The maximum biomass concentration obtained was 140 mg/L. The presence of neutral lipid droplets in the consortium was identified by staining with Nile Red. Development of the lipid rich consortium could be a suitable method for producing biofuel.