The one-pot synthesis of algal biomass/polyethyleneimine beads, ALPEI (electrostatic interaction followed by calcium ionotropic gelation), produces a stable sorbent whose sorption properties for rare earth elements (REEs) are significantly improved by functionalization. The grafting of sulfonic groups (S-ALPEI), which have high affinity for REEs, increases sorption capacities as high as 2.68 mmol Sc g−1, 0.61 mmol Ce g−1 and 0.53 mmol Ho g−1, at pH close to 4 (equilibrium pH). Sorption isotherms are fitted by the Langmuir equation for scandium and cerium; for holmium, the Freundlich and the Sips equations show better fits. Sorption occurs within 30–40 min; kinetic profiles are fitted by the pseudo-first order rate equation and the Crank equation (resistance to intraparticle diffusion). The sorbent has a marked preference for Sc(III) against Ce(III) and Ho(III) (confirmed by selectivity tests). The sorbent is also selective for REEs against alkali-earth elements. The three metals are readily desorbed (within 20–30 min) using HCl/CaCl2 solution. Desorption remains higher than 99% for 5 cycles while sorption performance is decreased by less than 6% at the fifth cycle. The sorbent is tested for the recovery of valuable metals from red mud solution at different pH values. Despite the large excess of heavy metals in the industrial solution, S-ALPEI shows a good affinity for REEs at pH close to 3.46 with important enrichment factors (in the range 19–118 depending on the metal). The material is fully characterized by BET, TGA, FTIR, XPS, elemental analysis, titration and SEM-EDX analysis. The sorption involves different mechanisms (on amine and sulfonic groups) including electrostatic attraction and chelation depending on pH and metal speciation.