Microalgae can be used as a source of alternative food, animal feed, biofuel, fertilizer, cosmetics, nutraceuticals and for pharmaceutical purposes. The extraction of organic constituents from microalgae cultivated in the different nutrient compositions is influenced by microalgal growth rates, biomass yield and nutritional content in terms of lipid and fatty acid production. In this context, nutrient composition plays an important role in microalgae cultivation, and depletion and excessive sources of this nutrient might affect the quality of biomass. Investigation on the role of nitrogen and phosphorus, which are crucial for the growth of algae, has been addressed. However, there are challenges for enhancing nutrient utilization efficiently for large scale microalgae cultivation. Hence, this study aims to highlight the level of nitrogen and phosphorus required for microalgae cultivation and focuses on the benefits of nitrogen and phosphorus for increasing biomass productivity of microalgae for improved lipid and fatty acid quantities. Furthermore, the suitable extraction methods that can be used to utilize lipid and fatty acids from microalgae for biofuel have also been reviewed.