Biodiesel is an alternative, renewable, biodegradable and environmentally friendly fuel for transportation, with properties like petroleum-derived diesel, and can be used directly in a compression ignition engine without any modifications. The world's fossil fuel and crude oil reserves are going to dry up in the next few decades, but, contrariwise, an attractive, high quality, readily available and economically extractable oil from microalgae is a substitute feedstock to produce alternative biodiesel fuel for the transportation sector in the future. Microalgae have a higher biomass productivity (tons/ hectare / year) and lipid yield (kg/ kg of algal biomass) as compared to vegetable oil crops. To overcome the problem of energy deficiency in developing countries, like Pakistan, and boost their economic growth, alternative fuels are proving very important for environment-friendly and sustainable development, especially in the last few decades. Different research studies on microalgae cultivation, characterization of microalgae oil (lipids), and evaluations of its socioeconomic feasibility to produce renewable biodiesel have been conducted in the past in Pakistan for its future prospects. This review paper includes the overall summary and compilation of the microalgae research conducted in Pakistan on biodiesel production and includes the algal biodiesel production cost analysis. The studies showed promising results for harnessing microalgae and using its lipids to produce biodiesel with favourable properties that were comparable to the conventional diesel in Pakistan. The information related to the microalgae research will help stakeholders and governmental organisations working in the renewable energy sector to consider its cultivation on a large scale, using waste water as a feedstock to produce biodiesel to meet the target set by the Government of Pakistan of using 10% blended biodiesel by the year 2025 in Pakistan.