Haematococcus pluvialis and Chromochloris zofingiensis are freshwater microalgae exploited to produce the high-value carotenoid, astaxanthin. Nonetheless, a copious amount of freshwater is consumed for microalgae cultivation, thereby raising concerns regarding sustainable astaxanthin production. Characterization of palm oil mill effluent (POME) obtained from a commercial facility in southern Sri Lanka revealed high concentrations of total nitrogen (TN), total phosphorous (TP) and low concentrations of heavy metals, thus showcasing the potential of POME as an alternative growth media for astaxanthin production. Hence, H. pluvialis and C. zofingiensis were cultivated in 2.5%, 5.0% and 7.5% POME with the aim of producing astaxanthin, reducing freshwater consumption, and simultaneous phycoremediation. H. pluvialis exhibited better adaptability to higher POME concentrations, with its maximum astaxanthin yield (22.43 mg/L) achieved in 7.5% POME, whilst reducing specific freshwater consumption for astaxanthin production by 43%. However, only moderate performance in phycoremediation was achieved, with removal of 50.9% chemical oxygen demand (COD), 49.3% total nitrogen and 69.4% total phosphorous at rates of 3.95 mg/L/d, 0.50 mg/L/d and 0.11 mg/L/d respectively. The heavy metal content in biomass was within permissible limits. Characterization of astaxanthin-extracted residual biomass of H. pluvialis revealed possible applications as protein-rich animal feed or feedstock for biofuel production. Results indicated that POME generated in Sri Lankan palm oil mills has the potential to be utilized for large scale production of microalgal astaxanthin. Nevertheless, pilot-scale experiments, product toxicology evaluation and techno-economic feasibility studies are required prior to implementation of large-scale POME-integrated astaxanthin production facilities.