Oleaginous yeast Trichosporon oleaginosus was studied for lipid production using municipal sludge with or without fortification of crude glycerol in a 15-L fermenter. The maximum lipid content (concentration) was 32.0% w/w (9.35 g/L), 33.6% (10.13 g/L), 33.3% (9.13 g/L), and 33.1% (9.03 g/L) w/w with the addition of 25, 50, 100, and 150 g/L glycerol, respectively. Glycerol concentration had little effect on lipid accumulation. However, glycerol concentration substantially affected increase of biomass concentration and cell count. The suitable glycerol concentration was approximately 40 g/L for Trichosporon oleaginosus growing in sludge medium with initial suspended solids (SS) concentration 30 g/L. Addition of nitrogen to sludge-glycerol medium enhanced lipid and biomass concentration. The energy conversion efficiency was 1.78, 1.55, and 1.71 with no nitrogen added, with addition of 1 g/L urea, and 3.7 g/L peptone, respectively. The biodiesel production cost was estimated nearly 0.75 US$/L.