This research studied the effect of solids retention time (SRT) on algal-activated sludge (AAS) association in carbon-nitrogen-phosphorus removal and lipid synthesis from municipal wastewater. Five 500-mL test reactors were operated at different SRTs (2, 4, 6, 8, and 10 days) parallelly, in a draw-and-fill mode with external aeration. The organic carbon (C), nitrogen (N), and phosphorus (P) removal were positively correlated with SRT. The highest C, N, and P removal rates of 89, 73, and 91% were observed at 10-day SRT. The algal percentage was more than 60% in the mixed biomass at all the SRTs at a steady state. The lipid content ranged from 15 to 30% and declined with an increase in SRT, with 60% saturated and monounsaturated fatty acid at all the SRTs. The cetane number varied from 56 to 64 indicating a good-quality biofuel. The Fourier transform infrared spectroscopy transmittance spectrum for 10-day SRT biomass showed the presence of chloroalkane, alcohols, phenols, alkane, esters, allene, alkynes, and phosphine. The AAS system can be used as the main treatment unit for treating municipal wastewater in a single reactor with SRT greater than 4 days. © 2020, Springer Nature B.V.