Hydrothermal (HT) conversion is a promising and suitable technology for the generation of biofuels from microalgae. Besides the fact that water is used as a “green” reactant and solvent and that no biomass drying is required, the technology offers a potential nutrient source for microalgae culture using an aqueous effluent very rich in essential inorganic nutrients. However, upon continuous and multiple recycling of this HT effluent, the recalcitrant organic fraction is likely to increase and may potentially attain toxic thresholds for microalgae use. In this work, we show the presence of recalcitrant N-containing organic compounds (NOC's) in the HT effluent. The most prominent NOC's in the extracts were carefully examined for their effect on microalgae, namely 2-pyrrolidinone and β-phenylethylamine (β-PEA). The first set of experiments consisted in testing these two substances at three different concentrations (10, 50 and 150 ppm) using three different microalgae strains: Phaeodactylum tricornutum, Chlorella sorokiniana and Scenedesmus vacuolatus. The confirmed half maximal inhibitory concentration (IC50) was approximately 75 ppm for all tested species. In the second set of experiments, P. tricornutum was grown using diluted HT effluent. Experimental conditions were set by adjusting the nitrogen concentration in the HT effluent to be equal to a known commercial medium. The concentrations of specific NOC's were lowered to concentrations of 8.5 mg/L 2-pyrrolidinone and 0.5 mg/L β-PEA after dilution. The growth of P. tricornutum using the diluted HT solution was kept constant with no evidence of inhibition or consumption of NOC's, as the concentration of the specific compounds remains the same before and after growth. Therefore, in order to avoid effects of accumulation of NOC's upon continuous recycling, the HT effluent was pumped through the existing hydrothermal gasification unit as a water clean-up step. The conversion of NOC's to ammonium was successfully achieved.