SummaryFood colours from natural resources have rapidly increased in popularity in recent years, with increased demand from the industry and health‐conscious consumers. Natural pigments may be of plant, animal or microbial origin. The pigments derived from microorganisms, including bacteria, fungi and microalgae are in higher demand as reliable sources of natural food colours. Similarly, the commercial use of algae has received a lot of attention, due to its potential applications in a variety of fields, including food, cosmetics, agriculture, horticulture and in human health. Chlorophylls, carotenoids (carotenes and xanthophylls) and phycobilins are the three main families of photosynthetic pigments found in algae. In spite of its great demand, the application of phycoerythrin (PE), a red‐coloured pigment under the phycobilin family, is however very challenging in terms of its extraction and stability under normal conditions. It is found in cyanobacteria (prokaryotic green‐blue microalgae) and microalgae (eukaryotic microalgae). The present review intends to provide an insight into the less explored phycoerythrin pigment, its sources, properties, extraction techniques and applications in the food industry.