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Phycoerythrin (PE) is a light harvesting red protein, found only in cyanophyta, rhodophyta, glaucophyta and cryptophyta. Till now, red algae are well characterized and exploited commercially for PE. High cost of PE (50-3600 US$ /mg), has compelled the scientists to look for its alternate sources. During present cyanobacterial screening, Microchaete yielded maximum PE (26.32 mg/g), which was further purified on DEAE-cellulose column using sodium acetate buffer (pH-5.5). In final step, purity value of analytical grade PE (5.12) was obtained that showed 21.8 kDa band corresponding to α-subunit of B-PE. 30ºC temperature, 12.5 μmol photons/m-2/s light, green wavelength, pH-8, 16:8 photoperiod and 50 mM salinity were the best conditions for maximum PE production. Pesticides (malathion and chlorpyriphos) and heavy metal (Cd2+, Cr6+) showed PE reduction whereas (Cu2+, Zn2+, Pb2+) showed PE enhancement at lower concentrations.