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Algae have an ample potential to produce biodiesel from spent wash of food industry. In addition, it is cheaper and presents an environment friendly way to handle food industry wastewater. This study was conducted to optimize the growth of microalgal strains and to assess biodiesel production potential of algae using untreated food industry wastewater as a source of nutrients. The food industry wastewater was collected and analyzed for its physicochemical characteristics. Different dilutions (10, 20, 40, 80, and 100%) of this wastewater were made with distilled water, and growth of two microalgal strains (Cladophora sp. and Spyrogyra sp.) was recorded. Each type of wastewater was inoculated with microalgae, and biomass was harvested after 7 days. The growth of both strains was also evaluated at varying temperatures, pH and light periods to optimize the algal growth for enhanced biodiesel production. After optimization, biodiesel production by Spyrogyra sp. was recorded in real food industry wastewater. The algal biomass increased with increasing level of food industry wastewater and was at maximum with 100% wastewater. Moreover, statistically similar results were found with algal growth on 100% wastewater and also on Bristol's media. The Cladophora sp. produced higher biomass than Spyrogyra sp. while growing on food industry wastewater. The optimal growth of both microalgal strains was observed at temperature 30 °C, pH: 8, light 24 h. Cladophora sp. was further evaluated for biodiesel production while growing on 100% wastewater and found that this strain produced high level of oil and biodiesel. Algae have an ample potential to produce biodiesel from spent wash of food industry. In addition, it is cheaper and presents an environment friendly way to handle food industry wastewater.