Biodiesel (BD) has grown in popularity over the last few years due to the global energy crisis, in addition to the depletion of reserves and the shortage of oil. The current study investigates the utilization of dairy effluent as a substratum for Yarrowia lipolytica, an oily yeast employed in biofuel generation. The dairy effluent has high biochemical oxygen demand, dissolved solids and, low pH. In this study, based on carbon nitrogen ratio (C/N), the alkaline pretreatment method (KOH 5%) was adopted to grow Y. lipolytica in dairy effluent. After 5 days of growth at 29°C, pH 6.9 (initial pH of dairy effluent), and stirring speed 120 rpm, the growth of Y. lipolytica produced 42.3 g/L biomass. Utilizing an ex‐situ transesterification method, the biomass was metamorphosed into BD. Using a modified version of Folch, Bligh, and Dyer's approach, lipid removal was done as the initial step. Moreover, the lipid was transesterified in a KOH catalyst, yielding 61% BD. Utilizing Fourier transform infrared spectroscopy analysis, the produced fatty acid methyl ester was examined.