Use of dyes is increasing day by day due to its multiple applications in different industries. The result is dye contaminated rich colored water, which not only produces aesthetically unpleasing effect but also creates serious environmental concerns. In present study, competent algae were isolated from wastewater streams and were tested for their efficiency to remove color from the dye contaminated wastewater. It was observed that three strains were capable of removing color from the wastewater. Among these three strains two strains were found more effective, therefore wastewater treatment experiment was conducted by the strain ADS-1 and ADS-2. These potent strains decolorized water up to 100% in 4-5 days, and complete decolorizationwas observed in 15 days. The algal biomass that was produced was further extracted using chloroform: methanol extraction and was analyzed for its biofuel potential using GC-Ms analysis. It was observed that many significant bio-products like kerosene, Paraffin, waxes blends were produced by the algae during course of wastewater decolorization. Such type of treatment options provides dual benefits of wastewater treatment and bioenergy production. Therefore, it can be opted for the development of efficient technology to ensure environmental protection of pollution reduction.