Microalgae are a promising feedstock for renewable fuels, and algal metabolic engineering can lead to crop improvement, thus accelerating the development of commercially viable biodiesel production from algae biomass. We demonstrate that protein-protein interactions between the fatty acid acyl carrier protein (ACP) and thioesterase (TE) govern fatty acid hydrolysis within the algal chloroplast. Using green microalga Chlamydomonas reinhardtii (Cr) as a model, a structural simulation of docking CrACP to CrTE identifies a protein-protein recognition surface between the two domains. A virtual screen reveals plant TEs with similar in silico binding to CrACP. Employing an activity-based crosslinking probe designed to selectively trap transient protein-protein interactions between the TE and ACP, we demonstrate in vitro that CrTE must functionally interact with CrACP to release fatty acids, while TEs of vascular plants show no mechanistic crosslinking to CrACP. This is recapitulated in vivo, where overproduction of the endogenous CrTE increased levels of short-chain fatty acids and engineering plant TEs into the C. reinhardtii chloroplast did not alter the fatty acid profile. These findings highlight the critical role of protein-protein interactions in manipulating fatty acid biosynthesis for algae biofuel engineering as illuminated by activity-based probes.