An oxy-hydrogen bio-fuel cell, based on a carbon-carbon electrode has been fabricated. The electrode pellets were prepared by taking carbon powder mixed with polyvinylalcohol as a binder. The anode was charged with Co-Al spinel mixed oxide at 700 degrees C, 30% KOH acted as an electrolyte. For the cyanobacterial bioreactor, a potential heterocystous blue green alga of Nostoc spp. has been used for hydrogen production and electrical energy generation. Various nutrient enrichment techniques are employed to increase the hydrogen generation efficiency of the algae. One litre free cell algal reactor attached to the fuel cell, at the anode end for hydrogen gas input, generated about 300 mV of voltage and 100 mA of current. Our present findings on the development of a low cost fuel cell with high efficiency of current output may be helpful in commercializing this technology.