Abstract: One of the most important technical barriers for algal biofuel is the substantial harvesting and extracting cost. The present invention includes a system and method for the pelletization of single cell microalgae through co-cultivation with filamentous fungi to enable the low cost separation of microalgae from liquid medium and to significantly increase the biomass and lipid yield. The approach represents a simple and straightforward method to significantly reduce the cost for algae-based biofuel production and enable the economically viable algae biofuel production.