Microalgal oils have attracted much interest as potential feedstocks for renewable fuels, yet our understanding of the regulatory mechanisms controlling oil biosynthesis and storage in microalgae is rather limited. Using Chlamydomonas reinhardtii as a model system, we show here that starch, rather than oil, is the dominant storage sink for reduced carbon under a wide variety of conditions. In short-term treatments, significant amounts of oil were found to be accumulated concomitantly with starch only under conditions of N starvation, as expected, or in cells cultured with high acetate in otherwise standard growth medium. Time-course analysis revealed that oil accumulation under N starvation lags behind that of starch and rapid oil synthesis occurs only when carbon supply exceeds the capacity of starch synthesis. In the starchless mutant BAFJ5, blocking starch synthesis results in significant increases in the extent and rate of oil accumulation. In the parental strain, but not the starchless mutant, oil accumulation under N starvation was strictly dependent on the available external acetate supply and the amount of oil increased steadily as the acetate concentration increased to the levels several-fold higher than that of the standard growth medium. Additionally, oil accumulation under N starvation is saturated at low light intensities and appears to be largely independent of de novo protein synthesis. Collectively, our results suggest that carbon availability is a key metabolic factor controlling oil biosynthesis and carbon partitioning between starch and oil in Chlamydomonas.