The global reliance on fossil-derived polymers continues to contribute to environmental degradation and climate change. As the world seeks sustainable alternatives, algae-derived polymers have emerged as a promising solution due to their renewable nature and compatibility with green chemistry and circular economy principles. Unlike traditional biomass sources, algae can be cultivated on non-arable land using saline or wastewater, reducing land-use conflict and freshwater consumption while simultaneously sequestering atmospheric CO₂. This review examines recent progress in the extraction, processing, and functionalization of algae-derived polymers, with a particular focus on polysaccharides such as alginate and carrageenan. A comparative analysis was conducted to evaluate their mechanical performance, biodegradability, and application scalability across various industries including sustainable packaging, biomedical devices, and textiles. The review draws on data from peer-reviewed publications within the past decade. The findings highlight that algal polysaccharides offer excellent film-forming capabilities, mechanical adaptability, and environmental biodegradability. Seaweed-derived polymers like carrageenan have shown strong potential in biomedical fields due to their gel-forming and biocompatible nature. Life-cycle assessments support the environmental benefits of algae-based bioplastics compared to conventional plastics. In conclusion, algae-derived polymers represent a rapidly advancing frontier in sustainable materials science. While their adoption in high-value sectors is accelerating, further interdisciplinary research is needed to overcome related cost, processing, and commercialization challenges.