Biodiesel is an alternative to diesel fuel, which is produced from bio oils via transesterification. It is nontoxic, biodegradable and has the potential to replace the conventional diesel fuel. Microalgae can produce fatty acids called unsaturated lipids, which can be extracted and processed to form biofuel. The present study was aimed to isolate of heterotrophic microalgae from hot springs of Palghar, Maharashtra for lipid production. Auxenochlorella pyrenoidosa was isolated and tested for its lipid production ability. Results of study revealed that A. pyrenoidosa has the ability to produce about 11.56% lipid of its dry weight. Fatty acid profile of the extracted lipid showed the presence of C14: