Abstract: Modern agriculture is undergoing a profound transformation from an intensive agricultural model with yield as the core goal to an ecological agricultural model, and the role of microalgae in promoting the development of ecological agriculture is increasingly valued. As an important component of paddy ecosystem, the multifunctional development of microalgae in rice production has become a research hotspot in multiple disciplines such as agriculture, ecology, energy and environmental science. This paper systematically reviews the development process of microalgae function and its application in rice production, summarizes the functions and mechanisms of microalgae in paddy ecosystems, and analyzes the opportunities and challenges faced by microalgae application in paddy ecosystems. The functional development of microalgae and their application research in paddy ecosystems can be divided into four stages: before 1950, the discovery and theoretical foundation of microalgae nitrogen fixation function; from 1951 to 1980, global research on screening and application of nitrogen fixing microalgae in paddy fields; from 1981 to 2000, research on the multifunctionality of microalgae in paddy ecosystems; from 2001 to present, research on the application of microalgae in modern sustainable agriculture. The functions of microalgae in paddy ecosystems include four categories: biological fertilizers and soil improvement, water purification and food sources, growth promotion and stress resistance, and biological pesticides. The current functional development and application of microalgae in paddy ecosystems have good opportunities, including the demand for agricultural non-point source pollution control, ecological agriculture development, and carbon reduction in paddies. However, there are still some shortcomings and challenges in the assessment of the composite impact of microalgae utilization in paddies, low-cost propagation and field application of microalgae, targeted regulation of paddy microalgae, analysis of microalgae action mechanisms, and extraction of functional substances. These directions are expected to become the research focus of this field in the future.