The use of microalgae to produce biodiesel is a beneficial and green substitute for conventional fossil fuels (a major source of greenhouse gas emissions). Microalgae have several merits, including their nontoxic nature, fast growth rate, growth not being dependent on the supply of fresh water, potential for biodegradability, and not requiring arable land for their growth. The exploration of novel frontiers to establish large-scale operations is vital for economically feasible biodiesel production, taking advantage of these favorable attributes. This review is focused on the recent development of the enzymatic transformation of microalgal oils into biodiesel. The areas addressed in this work include (i) microalgae and their lipid content, (ii) maximization of lipid productivity and lipid extraction, (iii) biodiesel production by enzymatic transesterification, (iv) enzyme kinetics, (v) factors affecting enzymatic transesterification, and (vi) immobilized enzymes and their limitations. In addition, various aspects of free enzyme and its potential future applications are discussed. This review also highlights a number of strategies using ionic liquids (ILs) for the successful production of microalgal biodiesel. The present study suggests that free enzyme has a greater potential than immobilized enzyme for the transesterification of bio-oils containing phospholipids into biodiesel.