Acetic acid derived from fast pyrolysis of lignocellulosic biomass is a promising substrate for microalgae fermentation for producing lipid-rich biomass. However, crude pyrolytic acetic acid solution contains various toxic compounds inhibiting algal growth. It was hypothesized that such an inhibition was mainly due to the cell membrane damage. In this work, the cell membrane property of algal cells was evaluated at various conditions to elucidate the mechanisms of inhibition caused by the pyrolytic substrate solution. It was found that acetic acid itself served a carbon source for boosting algal cell growth but also caused cell membrane leakage. The acetic acid concentration for highest cell density was 4 g/L. Over-liming treatment of crude pyrolytic acetic acid increased the algal growth with a concurrent reduction of cell membrane leakage. Directed evolution of algal strain enhanced cell membrane integrity and thus increased its tolerance to the toxicity of the crude substrate. Statistical analysis shows that there was a significant correlation between the cell growth performance and the cell membrane integrity (leakage) but not membrane fluidity. The addition of cyto-protectants such as Pluronic F68 and Pluronic F127 enhanced the cell membrane integrity and thus, resulted in enhanced cell growth. The transmission electron microscopy (TEM) of algal cells visually confirmed the cell membrane damage as the mechanism of the pyrolytic substrate inhibition. Collectively, this work indicates that the cell membrane is one major reason for the toxicity of pyrolytic acetic acid when being used for algal culture. To better use this pyrolytic substrate, cell membrane of the microorganism needs to be strengthened through either strain improvement or addition of membrane protectant reagents.