Among the alternative fuels, biodiesel and its blends are considered suitable and the most promising fuel for diesel engine. The properties of biodiesel are found similar to that of diesel. Many researchers have experimentally evaluated the performance characteristics of conventional diesel engines fuelled by biodiesel and its blends. The biodiesel production process requires simultaneous real time monitoring of certain properties like viscosity, acid number, iodine value, moisture content etc, such that the values are within ASTM standards. Therefore, an automated Biodiesel plant fitted with new innovative biosensors have been proposed which could make real time decision taking ability and monitor the overall production mechanism. The control system of the biosensor and production process was coupled with ARTIFICIAL NEURAL NETWORK (ANN). The proposed system have capability to detect 8 different starting oil samples and optimizes itself the best production yield of biodiesel. Therefore, the optimizing problems of the quality of initial feed of vegetable oil used for production of biodiesel are overcome. This paper provides experimental knowledge on the enormous studies for the development of advanced reactor system engineering for large scale production of biodiesel for commercial purpose.