Human activities are pushing earth beyond its natural limits, so recycling nutrients is mandatory. Microalgae are highly effective in nutrient recovery and have strong potential as a sustainable wastewater treatment technology. Here, nutrients from black water (toilet wastewater) were recovered as microalgal biomass, which was dried and assessed as a fertilizer in pot experiments compared with inorganic fertilizer. We deciphered the effects of microalgal biomass as a biofertilizer on plant growth and quality and the biological processes linked to greenhouse gas (GHG) emissions. In addition, we elucidated the assembly of the active microbiome in bulk soil and rhizosphere during barley development. Microalgal biomass application and inorganic fertilizer (NPK) resulted in similar plant productivity (16.6 g pot−1). Cumulative nitrous oxide (N2O) emissions were 4.6-fold higher in the treatment amended with microalgal fertilizer (3.1% of applied N) than that with inorganic fertilizer (0.5% of applied N). Nitrification by bacteria was likely the main pathway responsible for N2O emissions (R2 = 0.7, p ≤ 0.001). The application of nitrogen fertilizers affected the structures of both the active bacterial and protozoan communities, but these effects were less obvious than the strong plant effect, as the recruited microbiota varied among different plant developmental stages. Both treatments enriched similar bacterial and protozoan taxonomic orders but with different distributions through time across the plant developmental stages. Furthermore, the bacterial community showed a clear trend of resilience from the beginning of the experiment until harvest, which was not observed for protozoa. Our results indicate that the use of microalgal biomass as a fertilizer is a viable option for recycling nutrients from wastewater into plant production.