python postgres can I fetchall() 1 million rows?

fetchall() fetches up to the arraysize limit, so to prevent a massive hit on your database you can either fetch rows in manageable batches, or simply step through the cursor till its exhausted:

row = cur.fetchone()
while row:
   # do something with row
   row = cur.fetchone()

The solution Burhan pointed out reduces the memory usage for large datasets by only fetching single rows:

row = cursor.fetchone()

However, I noticed a significant slowdown in fetching rows one-by-one. I access an external database over an internet connection, that might be a reason for it.

Having a server side cursor and fetching bunches of rows proved to be the most performant solution. You can change the sql statements (as in alecxe answers) but there is also pure python approach using the feature provided by psycopg2:

cursor = conn.cursor('name_of_the_new_server_side_cursor')
cursor.execute(""" SELECT * FROM table LIMIT 1000000 """)

while True:
    rows = cursor.fetchmany(5000)
    if not rows:
        break

    for row in rows:
        # do something with row
        pass

you find more about server side cursors in the psycopg2 wiki

Consider using server side cursor:

When a database query is executed, the Psycopg cursor usually fetches all the records returned by the backend, transferring them to the client process. If the query returned an huge amount of data, a proportionally large amount of memory will be allocated by the client.

If the dataset is too large to be practically handled on the client side, it is possible to create a server side cursor. Using this kind of cursor it is possible to transfer to the client only a controlled amount of data, so that a large dataset can be examined without keeping it entirely in memory.

Here's an example:

cursor.execute("DECLARE super_cursor BINARY CURSOR FOR SELECT names FROM myTable")
while True:
    cursor.execute("FETCH 1000 FROM super_cursor")
    rows = cursor.fetchall()

    if not rows:
        break

    for row in rows:
        doSomething(row)