We all are aware that the depletion of the fossil fuel reservoirs has lead to an urgent search for alternative forms of present day fuels. The possible solution could come from biofuels, especially biodiesel. Biodiesel could be produced from plants, microorganisms, fungi, wastewater, microalgae etc., but these sources suffer from one or more drawbacks. However, microalgae could serve as the best source for biodiesel production since it does not lead to a land versus fuel confl ict. This chapter is mainly focused on the sources for the production of biodiesel, biodiesel production processes, catalysis involved and the factors affecting biodiesel production. We have to understand that for the best utilization of biodiesel in diesel engines, we have to incorporate technical modifi cations in traditional diesel engines so that biodiesel production could be promoted commercially.