As one of the most important environmental factors, oxygen is particularly important for synthesis of n-3 polyunsaturated fatty acids (n-3 PUFA) in microalgae. In general, a higher oxygen supply is beneficial for cell growth but obstructs PUFA synthesis. The generation of reactive oxygen species (ROS) under aerobic conditions, which leads to the peroxidation of lipids and especially PUFA, is an inevitable aspect of life, but is often ignored in fermentation processes. Irritability, microalgal cells are able to activate a number of anti-oxidative defenses, and the lipid profile of many species is reported to be altered under oxidative stress. In this review, the effects of oxygen on the PUFA synthesis, sources of oxidative damage, and anti-oxidative defense systems of microalgae were summarized and discussed. Moreover, this review summarizes the published reports on microalgal biotechnology involving direct/indirect oxygen regulation and new bioreactor designs that enable the improved production of PUFA.