Algae, carbon dioxide and wastewater are the most promising research topics in recent years. Integrated sustainable approaches on cultivating microalgae in both real-time and simulated wastewater with carbon dioxide (CO₂) are experimented as environmentally feasible approach. However, in terms of high macromolecules rich biomass productivity (example: high lipid accumulated biomasses productivity for biofuel applications) are needed to achieve sustainable productivity. Hence, it is needed to improve photosynthesis process by which we can achieve higher CO₂ sequestration and enriched biomass productivity. Therefore, on improving photosynthesis process, efficiency of enzymes involved in photosynthetic pathways needs to be enriched, light utilization range needs to be improved and majorly the release of captured CO₂ needs to be minimized. These modifications are achievable through genetic engineering approaches in environmentally friendly way. Hence, this review provides the detailed potential strategies that helps in enhancing the microalgae-based CO₂ fixation, technical insights into existing limitations and challenges, future research directions to achieve sustainable development.