Wastewater (WW) treatment in anaerobic membrane bioreactors (AnMBR) is considered more sustainable than in aerobic reactors. However, outputs from AnMBR are a mixed methane and carbon dioxide gas stream as well as ammonium- (N) and phosphate- (P) containing waters. Using AnMBR outputs as inputs for photoautotrophic algal cultivation can strip the CO2 while removing N and P from effluent which feed algal biomass generation. Recent advances in algal engineering have generated strains that produce high-value side products concomitant with biomass, although only shown in heavily domesticated, lab-adapted strains. Here, it was investigated whether engineered Chlamydomonas reinhardtii could be grown directly in AnMBR effluent with CO2 concentrations found in AnMBR off-gas. The strain was found to proliferate over bacteria in the non-sterile effluent, consume N and P to levels that meet general discharge or reuse limits, and tolerate cultivation in modelled (extreme) outdoor environmental conditions prevalent along the central Red Sea coast. In addition to ∼2.4 g CDW/L biomass production in 96 h, a high-value heterologous sesquiterpene co-product could be obtained from ‘milking’ up to 837 µg/L culture in 96 h. This is the first demonstration of a combined bio-process that employs a heavily engineered algal strain to enhance the product generation potentials from AnMBR effluent treatment. This study shows it is possible to convert waste into value through use of engineered algae while also improving wastewater treatment economics through co-product generation.