Many species of microalgae produce hydrocarbons, polysaccharides, and other valuable products in significant amounts. However, large-scale production of algal products is not yet competitive against non-renewable alternatives from fossil fuel. Metabolic engineering approaches will help to improve productivity, but the exact metabolic pathways and the identities of the majority of the genes involved remain unknown. Recent advances in bioinformatics and systems-biology modeling coupled with increasing numbers of algal genome-sequencing projects are providing the means to address this. A multidisciplinary integration of methods will provide synergy for a systems-level understanding of microalgae, and thereby accelerate the improvement of industrially valuable strains. In this review we highlight recent advances and challenges to microalgal research and discuss future potential.