Global requirement for algal foods is increasing, as they are progressively consumed for its nutrition and health. Macroalgae is a proven source of metabolites, proteins, pigments, bioactive compounds, and algal polysaccharides. The unique polysaccharides such as agar, carrageenan, porphyran, alginate, fucoidan, laminarin, and ulvan are known for its wide range of bioactivities and extensively used for applications from tissue engineering to drug delivery. However, there are few limitations due to its high molecular size, low compatibility, and hydrocolloid nature. Hence, the enzymatically produced algal oligosaccharides have drawn tremendous attention due to its green synthesis, solubility, and lower molecular size. They are reported to have bioactivities including antioxidant, antiglycemic, immunostimulatory, anti-inflammatory, and prebiotic activities, which can be used in the healthcare and nutraceutical industry for the manufacture of functional foods and dietary supplements. However, identification of potential microorganisms, producing polysaccharide hydrolyzing enzymes, remains a major bottle neck for efficient utilization of bioactive algal oligosaccharides. This review summarizes the recent developments in the identification and characterization of microbial enzymes for the production of bioactive algal oligosaccharides. This can improve our understanding of bioactive algal oligosaccharides and pave way for efficient utilization of macroalgae to prevent various chronic diseases.