N₂O is an important greenhouse gas that also damages the ozone layer. N₂O emissions have been observed during microalgae cultivation and in microalgae-based ecosystems, such as eutrophic lakes. However, little has been reported on the important role of the N₂O balance in algae and the potential algal N₂O production pathways. A review of recent relevant studies on N₂O synthesis and fixation by algae shows that the studies mainly focus on the relationship between algae and N₂O emissions, several possible pathways of N₂O production and consumption in algae, the influence of the algal microenvironment on the distribution pattern of N₂O, and the potential impacts on global climate change. However, the Intergovernmental Panel on Climate Change currently does not consider the possible N₂O emissions during algal blooms or algal aquaculture; hence, it is necessary to intensify experimental studies related to algal N₂O production globally to take important steps towards a comprehensive clarification of the important roles of algae in N₂O emission and fixation and a comprehensive assessment of greenhouse gas emissions from aquatic ecosystems.