Landfill bound waste from the oil palm industry, spent bleaching clay (SBC) containing significant amounts of adsorbed crude palm oil (CPO) has the potential to be used for biodiesel production. In this study, SBC was subjected to ultrasound-aided in situ transesterification with a co-solvent to convert the oil into methyl esters (biodiesel). Optimized reaction conditions used were 5.4 wt% KOH, methanol to oil mass ratio of 5.9:1 and 1:1 mass ratio of co-solvent (petroleum ether or ethyl methyl ketone) to SBC. The remaining bleaching clay was calcined at 500°C for 30 min and reutilized for bleaching. Absence of -CH absorption peaks in the FTIR and TGA-FTIR analysis of regenerated clays shows the regeneration efficiency of the method. In situ transesterification and heat regeneration helped to restore pores without adversely affecting the clay structure. The use of ethyl methyl ketone (EMK) as the co-solvent in the in situ transesterification process produced clay with better bleaching qualities.