Intense utilization and mining of fossil fuels for energy production have resulted in environmental pollution and climate change. Compared to fossil fuels, microalgae is considered as a promising candidate for biodiesel production due to its fast growth rate, high lipid content and no occupying arable land. However, monocultural microalgae bear high cost of harvesting, and are prone to contamination, making them incompetent compared with traditional renewable energy sources. Co-culture system induces self-flocculation, which may reduce the cost of microalgae harvesting and the possibility of contamination. In addition, the productivity of lipid and high-value by-products are higher in co-culture system. Therefore, co-culture system represents an economic, energy saving, and efficient technology. This review aims to highlight the advances in the co-culture system, including the mechanisms of interactions between microalgae and other microorganisms, the factors affecting the lipid production of co-culture, and the potential applications of co-culture system. Finally, the prospects and challenges to algal co-culture systems were also discussed.