The potential of microalgae biodiesel is unlimited. The ingenious combination of microalgae biomass exploitation, decontamination of municipal wastewater, and CO2 fixation may gestate the ultimate hope for solving the problem of liquid alternative fuel. However, the municipal wastewater has some characteristics, such as high content of nitrogen and phosphorus, low C/N ratio, fluctuation of loading rate, toxicity of heavy metal, etc. To overcome these problems, studies are currently underway in our laboratory. In this paper, an idea of constructing a sustainable biodiesel production system from microalgae on wastewater is assumed. The system could realize CO2 fixation, decontamination of municipal wastewater, and production of high value-added biodiesel by microalgae. Firstly, municipal wastewater is used as the cultivation media and CO2 as gaseous fertilizer for mass culture of Shuihua microalgae. So with the harvest of large quantities of low-price Shuihua microalgae, the nitrogen, phosphorus and heavy metals can be removed from the wastewater, and the emission of greenhouse gas can be reduced. Secondly, try to breed a high-oil content engineering microalgae by heterotrophic cultivation which could realize high-density growth through the conjunction of the advanced methods of fermentation engineering with the microalgae breeding technology. Finally, make the high-oil content engineering microalgae cultivated on the decomposed Shuihua microalgae cells, and try to make the high-oil content engineering microalgae grow rapidly in the initial stage and start oil accumulation when nitrogen is exhausted by controlling the conditions of fermentation.