Hydrothermal liquefaction (HTL) of microalgae biomass generates an aqueous phase (AP) byproduct with limited energy value. Recycling the AP solution as a source of nutrients for microalgae cultivation provides an opportunity for a cost-effective production of HTL based biofuel and algal biomass feedstock for HTL, allowing a closed-loop biofuel production in microalgae HTL biofuel system. This paper aims to provide a comprehensive overview of characteristics of AP and its nutrients recycling for algae production. Inhibitory effects resulted from the toxic compounds in AP and alleviation strategies are discussed.