Biodiesel is a fuel consisting of the alkyl monoesters of fatty acids from vegetable oils or animal fats. Biodiesel is receiving increasing attention as an alternative, non-toxic, biodegradable and renewable diesel fuel. Many studies have shown that the properties of biodiesel are very close to diesel fuel. Therefore, biodiesel can be used in diesel engines with little or no modification. Biodiesel is usually produced from food-grade vegetable oils that are more expensive than diesel fuel. Therefore, use of biodiesel produced from food-grade vegetable oil may be limited to cases of severe shortages or emergencies. However, lower cost feedstocks are available. Rendered animal fats and restaurant waste oils are an attractive source to produce biodiesel. The problem with processing rendered fats and oils is that they usually contain large amounts of free fatty acids that cannot be converted to biodiesel using an alkaline catalyst due to the formation of soaps. An alternative way is to use acid catalysts, which are more tolerant of free fatty acids. The objective of this study was to develop a process to utilize rendered fats, known as yellow grease, as a biodiesel feedstock and to build a pilot plant to implement this process. The pilot plant was successfully constructed and was shown to be capable of processing rendered fats containing 40% free fatty acids. After preparing a sufficient amount of biodiesel from rendered animal fats and restaurant waste oils, the impact of the biodiesel on diesel engine exhaust emissions and engine performance was evaluated and compared to No. 2 diesel fuel and soybean oil methyl ester. The methyl esters produced from yellow grease gave nearly the same thermal efficiency but higher fuel consumption compared with No. 2 diesel fuel. At the operating XV condition studied, the biodiesel produced 17.77% and 46.27% lower CO and HC emissions, respectively, than No. 2 diesel fuel. The Bosch Smoke Number for biodiesel from yellow grease was 64.21% less than with No. 2 diesel fuel. The methyl esters had 11.60% higher NO x emissions than the No. 2 diesel fuel. No significant differences were found in the exhaust emissions and engine performance between the biodiesel produced from yellow grease and biodiesel from soybean oil.