Problem Statement:The research on the production of biodiesel has increased significantly in recent years because of the need for an alternative fuel which endows with biodegradability, low toxicity and renewability. Plant oils, animal fats, microalgal oils and waste products such as animal rendering, fish processing waste and cooking oils have been employed as feedstocks for biodiesel production. In order to design an economically and environmentally sustainable biodiesel production process, a proper understanding of the factors affecting the process and their relative importance is necessary. Approach: A comprehensive review of the literature on the subject of biodiesel production was carried out. Traditionally biodiesel has been produced using either acid or base catalysts. The multi-step purification of end products, wastewater treatment and energy demand of the conventional process has lead to search for alternative option for production of biodiesel. The use the enzyme lipase as a biocatalyst for the transesterification reaction step in biodiesel production has been extensively investigated. Lipase is produced by all living organisms and can be used intracellularly or extracellularly. Conclusion: To date, the most popular microbes used for their lipases have been filamentous fungi and recombinant bacteria. A summary of lipases used in transesterification and their optimum operating conditions is provided. In addition to the choice of lipase employed, factors which make the transesterification process feasible and ready for commercialization are: enzyme modification, the selection of feedstock and alcohol, use of common solvents, pretreatment of the lipase, alcohol to oil molar ratio, water activity/content and reaction temperature. Optimization of these parameters is necessary in order toreduce the cost of biodiesel production. Use of no/low cost waste materials as feedstocks will have double environmental benefits by reducing the environmental pollution potential of the wastes and producing an environmentally friendly fuel.