Biodiesel is an alternative, carbon-neutral fuel compared to fossil-based diesel, which can reduce greenhouse gas (GHGs) emissions. Biodiesel is a product of microorganisms, crop plants, and animal-based oil and has the potential to prosper as a sustainable and renewable energy source and tackle growing energy problems. Biodiesel has a similar composition and combustion properties to fossil diesel and thus can be directly used in internal combustion engines as an energy source at the commercial level. Since biodiesel produced using edible/non-edible crops raises concerns about food vs. fuel, high production cost, monocropping crisis, and unintended environmental effects, such as land utilization patterns, it is essential to explore new approaches, feedstock and technologies to advance the production of biodiesel and maintain its sustainability. Adopting bioengineering methods to produce biodiesel from various sources such as crop plants, yeast, algae, and plant-based waste is one of the recent technologies, which could act as a promising alternative for creating genuinely sustainable, technically feasible, and cost-competitive biodiesel. Advancements in genetic engineering have enhanced lipid production in cellulosic crops and it can be used for biodiesel generation. Bioengineering intervention to produce lipids/fat/oil (TGA) and further their chemical or enzymatic transesterification to accelerate biodiesel production has a great future. Additionally, the valorization of waste and adoption of the biorefinery concept for biodiesel production would make it eco-friendly, cost-effective, energy positive, sustainable and fit for commercialization. A life cycle assessment will not only provide a better understanding of the various approaches for biodiesel production and waste valorization in the biorefinery model to identify the best technique for the production of sustainable biodiesel, but also show a path to draw a new policy for the adoption and commercialization of biodiesel.