Microalgae make up the largest and likely most diverse group of photosynthetic organisms in freshwater and marine systems. As new technologies are emerging for the study of bioactive compounds from microalgae, this group is drawing attention as a promising source of natural products that have wide applications in the food and pharmaceutical industries. Algae-derived bioactive compounds are attractive resources for drug screening, given their tremendous structural diversity and biological availability. In this chapter, we first discuss medicinally important products, such as carotenoids, including β-carotene, fucoxanthin, astaxanthin, and lutein, as well as essential fatty acids that originate in microalgae. We then briefly introduce screening assays for antioxidant, antimicrobial, antiviral, anticancer, and immunomodulatory effects, and explore biosynthesis of natural products, which have been widely used in food and cosmetics for their antioxidant effects and nutritional value, and we discuss the potential use of fucoxanthin and its derivatives as anticancer agents. In addition, we describe health benefits of the essential fatty acids eicosapentaenoic acid and docosahexaenoic acid. Further, this chapter emphasizes that microalgae provide a rich source of compounds for therapeutic drug screening and describes examples of screening assays for detection of biological activities of algae-derived compounds.