Recently, algae have become the latest feasible source being targeted for biofuel production since they exhibit several attractive features. An investigation concerning the treatment of wastewater and the production of biodiesel by different cyanobacteria and micro-algae has been undertaken. Twelve soil and water samples were collected from different localities in Egypt. Eleven microalgae were isolated from collected soil and water samples and subjected to different purification methods. The isolated microalgae were used in the treatment of wastewater samples, and the physical and chemical properties of wastewater samples were evaluated before and after treatment. Determination of lipid content of all isolated microalgae was carried out and showed 2.10 up to 5.13% of lipid. Factors affecting the lipid content productivities by selected promising microalgae were investigated viz. pH, incubation periods, and nitrogen sources. Three isolates were selected for cultivation on large scale, Oscillatoria chalybea (2) with dry weight 1028.4 mg and lipid yield 0.72%, O. chalybea (3) with dry weight 480.4 mg and lipid yield 0.9%, and O. chalybea (5) with dry weight 524.4 mg and lipid yield 1.01%. Extraction of oil from microbial biomass was done by Bligh and Dyer method. The lipid composition was determined as fatty acid methyl esters (FAMEs) through the direct transesterification method. The conversion of the extracted oil into biodiesel was analyzed by standard gas chromatographic technique.