Microalgae are being recognized as valuable sources of bioactive chemicals with important medical properties, attracting interest from multiple industries, such as food, feed, cosmetics, and medicines. This review study explores the extensive research on identifying important bioactive chemicals from microalgae, and choosing the best strains for nutraceutical manufacturing. It explores the most recent developments in recovery and formulation strategies for creating stable, high-purity, and quality end products for various industrial uses. This paper stresses the significance of using Life Cycle Analysis (LCA) as a strategic tool with which to improve the entire process. By incorporating LCA into decision-making processes, researchers and industry stakeholders can assess the environmental impact, cost-effectiveness, and sustainability of raw materials of several approaches. This comprehensive strategy will allow for the choosing of the most effective techniques, which in turn will promote sustainable practices for developing microalgae-based products. This review offers a detailed analysis of the bioactive compounds, strain selection methods, advanced processing techniques, and the incorporation of LCA. It will serve as a valuable resource for researchers and industry experts interested in utilizing microalgae for producing bioactive products with medicinal properties.