Active matter comprises individual energy-consuming components that convert locally stored energy into mechanical motion. Among these, liquid crystal dispersed self-propelled colloids have displayed fascinating dynamic effects and nonequilibrium behaviors. In this work, we introduce a new type of active soft matter based on swimming microalgae and lyotropic nanocellulose liquid crystal. Cellulose is a kind of biocompatible polysaccharide that nontoxic to living biological colloids. In contrast to microalgae locomotion in isotropic and low viscosity media, we demonstrate that the propulsion force of swimming microalgae can overcome the stabilizing elastic force in cholesteric nanocellulose liquid crystal, with the displacement dynamics (gait, direction, frequency, and speed) be altered by the surrounding medium. Simultaneously, the active stress and shear flow exerted by swimming microalgae can introduce local perturbation in surrounding liquid crystal orientation order. The latter effect yields hydrodynamic fluctuations in bulk phase as well as layer undulations, helicoidal axis splay deformation and director bending in the cholesteric assembly, which finally followed by a recovery according to the inherent viscoelasticity of liquid crystal matrix. Our results point to an unorthodox design concept to generate a new type of hybrid soft matter that combines nontoxic cholesteric liquid crystal and active particles, which are expected to open opportunities in biosensing and biomechanical applications.