A novel method for simultaneous bioflocculation and pretreatment of algae is revealed. The method includes bioflocculation of precultured algae (Chroococcus sp.) using a pellet forming filamentous fungus (Aspergillus lentulusFJ172995) resulting in nearly 100% harvesting within 6 h without addition of any nutrient or carbon source at the optimized fungal/algal (F/A) ratio of 1 : 3. The algal–fungal interactions require a metabolically active fungus with opposite charge. The bioflocculation process is replicable at the reactor scale under continuous aeration. A simple incubation of harvested algal–fungal pellets under controlled conditions was associated with significant cellulase production (>0.4 FPU mL−1 ) by the fungus leading to soluble sugar release (≈ 360 mg L−1) from algal cells. As a result, >54% enhancement in digestibility and a marked increase in methane production (up to 50%) from algal–fungal pellets during anaerobic digestion were noticed. The invented method is a unique process of its kind and has potential application in algae based biofuel production including biomethane, biohydrogen and biodiesel as well as in the extraction of other valuable compounds from microalgal biomass.