Microalgae already serve as a major natural source of valuable macromolecules including carotenoids, long-chain polyunsaturated fatty acids and phycocolloids. As photoautotrophs, their simple growth requirements make these primitive plants potentially attractive bioreactor systems for the production of high-value heterologous proteins. The difficulty of producing stable transformants has meant that the field of transgenic microalgae is still in its infancy. Nonetheless, several species can now be routinely transformed and algal biotechnology companies have begun to explore the possibilities of synthesizing recombinant therapeutic proteins in microalgae and the engineering of metabolic pathways to produce increased levels of desirable compounds. In this review, we compare the current commercially viable bioreactor systems, outline recent progress in microalgal biotechnology and transformation, and discuss the potential of microalgae as bioreactors for the production of heterologous proteins.