The increasing pollution of water resources caused by the input of nutrients, heavy metals, and emerging contaminants has revealed the limitations of conventional treatment methods and intensified the need for sustainable, low-cost technologies with resource recovery potential. Algae-based systems, due to their ability to simultaneously remove pollutants and produce valuable biomass, have emerged as one of the innovative options for biological wastewater treatment. This paper was developed with the aim of critically analyzing the efficiency, limitations, and scalability of algal systems in wastewater treatment, as well as examining their role in the circular economy and resource recovery. Recent research on pollutant removal mechanisms, the performance of different algal species, and engineered systems including algal ponds, photobioreactors, algal biofilms, and hybrid algae–bacteria systems were reviewed and compared. Quantitative data related to pollutant removal efficiency, heavy metal adsorption capacity, and biomass productivity were also analyzed. Results showed that Chlorella vulgaris and Scenedesmus obliquus are capable of removing 85–97% of nitrogen and 80–95% of phosphorus from municipal wastewater. In addition, hybrid systems and algal biofilms demonstrated more stable performance than conventional systems by reducing energy consumption and facilitating biomass harvesting. Despite these advantages, challenges such as the high cost of biomass harvesting, dependence on climatic conditions, and reduced efficiency in real wastewater still hinder the widespread commercialization of these technologies. The main innovation of this paper lies in presenting a problem-oriented analysis of the gap between laboratory results and industrial performance of algal systems, along with examining the capacity of native Iranian strains and the role of hybrid systems in improving scalability and economic sustainability. The findings of this study indicate that integrating algal technologies with a circular economy and resource recovery approach can pave the way for the development of a new generation of sustainable treatment systems.