This work evaluated the potential of microalgae of Chlorella sp., SL7A, Chlorococcum sp., SL7B and Neochloris sp.,SK57 cultivated in river water contaminated with pharmaceutical effluent for biomass and lipid production. It has been observed that fast growing algae in this medium is Neochloris sp.SK57. Maximum biomass and lipid yield was obtained from Neochloris sp. SK57 (0.52 g/l) and Chlorococcum sp. SL7B (0.129 g/l)along with drycell weight of lipid was 28%.The increased in biomass and lipid in this media is could due to assimilation of organic nutrients and stress due to other components present in the river water. Fatty acid profile of algal biomass showed that saturated fatty acids production is enhanced in oils of Neochloris sp. SK57, and its suitability in food and fuel applications. Water quality of the river water was monitored before and after algal cultivation. Results showed that quality of river water was improved after algal cultivation.