The main aim of this work was to develop a heterogeneous Fe
2
O
3
/CaO
2
bifunctional catalyst prepared from iron sand and 3 different CaO
2
sources (CaCO
3
, Ca (OH)
2
, and limestone) using wet impregnation and calcination methods for biodiesel production. The effects of different CaO
2
sources and Fe/Ca ratio in the catalyst were investigated to provide insight into the catalyst character and biodiesel yield. X-ray diffraction, X-ray fluorescence, and scanning electron microscopy analyses were used to characterize the catalyst. CaCO
3
was concluded as the best CaO
2
source, while the best Fe/Ca configuration was found to be 1:4, giving the highest biodiesel yield (97.0401%) with no diglycerides. Greater addition of Fe loading would result in an amorphous structure, and all catalysts were relatively crystalline. Fe was concluded to favor the esterification reaction and biodiesel formation, while CaO
2
was seen to favor the transesterification reaction and fatty acid methyl ester (FAME) formation. The catalyst mechanism was also established in this study, where esterification of free fatty acid (FFA) and glycerol took place on the acid site to produce diglyceride and transesterification of triglyceride by methanol occurred on the basic site.