The transesterification of used soybean oil with methanol was carried out over hydrated lime (HL), Ca(OH)2, and its decomposition products in the 200–500 °C range. The catalysts were characterized by X-ray powder diffraction (XRD), thermogravimetric analysis, and scanning electron microscopy. The XRD powder patterns demonstrated that the pristine sample consisted of a mixture of calcium hydroxide and calcite. It was noticed that the coexistence of CaO, Ca(OH)2, and CaCO3 remained up to 400 °C. At 500 °C, Ca(OH)2 is transformed into CaO so that this and CaCO3 are the only remaining phases. In the transesterification reaction, the influence of calcination temperature, reaction time, catalyst amount, methanol:oil ratio, and reaction temperature was studied. Full conversion of the raw materials into biodiesel (BD) was obtained with the fresh HL. In order to determine any change in the solid, it was recovered after 10, 30, and 60 min of reaction and analyzed by XRD analysis. Only Ca(OH)2, CaCO3, and traces of monohydrocalcite were detected. From the results it was demonstrated that the active phase for biodiesel production was calcium hydroxide. Furthermore, the catalyst was used up to three times without deactivation. A simple, economic, and environmentally friendly way to obtain biodiesel was developed considering (a) used soybean oil, considered waste, was employed as raw material, (b) hydrated lime is cheap and readily available, and (c) full conversion of the raw materials into BD was achieved with the as-received HL.