Depletion of fossil fuel and massive emissions of hazardous greenhouse gases are prompting many researchers to focus on greener renewable fuel such as biodiesel, which has the potential to replace petrodiesel partially. This review covers various aspects related to biodiesel feedstock and its effects on biodiesel characteristics, biodiesel production methods, blending techniques, biodiesel properties, combustion, engine performance, and emission analysis, the effects of different additives on biodiesel characteristics, and some challenges associated with biodiesel. Moreover, different relevant empirical correlations of biodiesel properties and combustion parameters are presented. Despite alkali catalysis being the most adopted transesterification process, lipase catalysis and heterogeneous catalysis are potential processes for future biodiesel production from low‐cost feedstock. Biodiesel has higher viscosity, density, flash point, cetane number, and pour point while having low heating value in comparison with petrodiesel. Most studies conducted on diesel engine led to a reduction in brake power, brake thermal efficiency, carbon monoxide, sulfur dioxide, particulate matter, and unburned hydrocarbons, and increased brake specific fuel consumption and oxides of nitrogen are associated with biodiesel compared to petrodiesel. In brief, biodiesel is comparable to petrodiesel. However, before there is a large‐scale application of biodiesel in the automotive sector it has to overcome some challenges such as its compatibility with engine components, its instability, its effect on engine wear, deposit formation, and clogging of fuel filters and injectors. Increased focus should also be given to second‐generation biodiesel over first‐generation biodiesel because second‐generation biodiesel can offset production costs, reduce deforestation, and solve the food versus fuel problem. © 2022 Society of Chemical Industry and John Wiley & Sons, Ltd.