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Carotenoids, with their diverse biological activities and potential pharmaceutical applications, have garnered significant attention as essential nutraceuticals. Microalgae, as natural producers of these bioactive compounds, offer a promising avenue for sustainable and cost-effective carotenoid production. Despite the ability to cultivate microalgae for its high-value carotenoids with health benefits, only astaxanthin and β-carotene are produced on a commercial scale by <i>Haematococcus pluvialis</i> and <i>Dunaliella salina,</i> respectively. This review explores recent advancements in genetic engineering and cultivation strategies to enhance the production of lutein by microalgae. Techniques such as random mutagenesis, genetic engineering, including CRISPR technology and multi-omics approaches, are discussed in detail for their impact on improving lutein production. Innovative cultivation strategies are compared, highlighting their advantages and challenges. The paper concludes by identifying future research directions, challenges, and proposing strategies for the continued advancement of cost-effective and genetically engineered microalgal carotenoids for pharmaceutical applications.