The global proliferation of the sugar industry has led to the production of large amounts of untreated effluent being released into the environment, prompting the exploration of energy-saving technologies like microbial desalination cells (MDCs). Despite the proven efficiency of MDCs in wastewater treatment and desalination, their performance is hindered by the high cost and toxicity of the cathode catalysts. MDCs powered by an algal cathode offer an alternative solution by enhancing the effectiveness of the oxidation–reduction reaction and eliminating the need for expensive catalysts and aeration at the cathode. The main aim of this study is to evaluate the efficiency of a Scenedesmus obliquus-inoculated photosynthetic MDC (PMDC) in the cathode chamber in comparison to a traditional aerated MDC. It focuses on using sugar industry effluent as an anolyte to enhance the electricity production when treating sugar industry wastewater and achieve simultaneous desalination. This study assesses the performance of MDCs and PMDCs in terms of wastewater treatment, energy generation, and desalination. The results indicate that the PMDC outperformed the MDC throughout the experiment by achieving 21.6% desalination, an average voltage of 275.9 mV, 73.8% anode COD removal, and a maximum power density of 6.8 mW/m², exceeding the performance efficiency of the MDC by 6.43%, 27.5%, 18.5%, and 112.5%, respectively. These results demonstrate that PMDCs are more effective than MDCs in producing electricity, desalinating water, and treating wastewater. Furthermore, PMDCs have the potential to remove nutrients while producing algal biomass, making them a viable alternative for water and wastewater treatment.