Long-term storage of carbon dioxide (CO2) and other forms of carbon in non-atmospheric reservoirs is called carbon sequestration. Selective anthropogenic enrichment of the atmospheric carbon pool is causing dire environmental problems, thereby necessitating remediation by mitigation. Algae possess efficient carbon concentrating mechanisms and consequently high photosynthetic rates which make them suitable candidates for biosequestration of CO2. Globally, nearly half of the atmospheric oxygen is generated by algal photosynthesis despite the fact that algae account for less than 1% of photosynthetic biomass. In water bodies, algae are responsible for creating the ‘biological pump’ that transports carbon from the upper sunlit waters to the depth below. A diverse array of photoautotrophs ranging from prokaryotic cyanobacteria to eukaryotic algae such as Chlorophytes, and even protists like euglenoids, contribute to this ‘biological pump’. It operates in a variety of aquatic ecosystems ranging from small freshwater ponds to the oceans where it has been most extensively studied. Two separate but intricately linked processes constitute this ‘biological pump’, viz. the ‘organic carbon pump’ and the ‘calcium carbonate pump’. The present review discusses the natural CO2 sequestration processes carried out by algae and cyanobacteria in their native ecosystems. © 2017 Informa UK Limited, trading as Taylor & Francis Group.