Recent years, algal polysaccharides were mainly investigated for pharmaceutical, nutraceuticals and biomedical applications due to their promising bioactive properties. Moreover, it is now becoming a potential source for several non-medical and non-food applications in which biofuels are a major sector. The marine algae contain a variety of polysaccharides comprising 15–75% of dry biomass, including mucopolysaccharides, structured as well as storage polysaccharides. Industrial and dietary use of algal polysaccharide is on the rise, having an economic global impact. They have been industrially used as stabilizers, emulsifiers, thickeners, animal feed, foods and beverages, pharmaceuticals among others. Despite its low calorie and fat content, seaweed contains a significant amount of fiber (polysaccharide) that is beneficial to the digestive system. In industries for pharmaceuticals and biomedicine, alginates, fucoidans, ulvans, carrageenans, and chitin are becoming increasingly important. In fact, little research has been conducted on microalgal polysaccharides, linking their chemical structure with their biological activity. Moreover, with breakthrough technologies viable microalgal cultivation and improved carbohydrate production must be developed. Several studies highlighted the recent updates on microalgae, their key challenges in production and characterization of microalgal polysaccharides but lacking connection of chemical structure and functionality. The present review provides a brief summary of the key advances in the feasible production strategies of microalgal polysaccharides to make its extraction economically feasible, review on recent cost-effective extraction and purification methods. Moreover, analyzed structure divergence and tried to correlate their chemical structure with functionality prior to describing its broader potential beyond its existing applications. Graphical abstract