Biodiesel is a clean-burning fuel produced from grease, vegetable oils, or animal fats. Biodiesel is produced by transesterification of oils with short-chain alcohols or by the esterification of fatty acids. The transesterification reaction consists of transforming triglycerides into fatty acid alkyl esters, in the presence of an alcohol, such as methanol or ethanol, and a catalyst, such as an alkali or acid, with glycerol as a byproduct. Because of diminishing petroleum reserves and the deleterious environmental consequences of exhaust gases from petroleum diesel, biodiesel has attracted attention during the past few years as a renewable and environmentally friendly fuel. Since biodiesel is made entirely from vegetable oil or animal fats, it is renewable and biodegradable. The majority of biodiesel today is produced by alkali-catalyzed transesterification with methanol, which results in a relatively short reaction time. However, the vegetable oil and alcohol must be substantially anhydrous and have a low free fatty acid content, because the presence of water or free fatty acid or both promotes soap formation. In this article, we examine different biodiesel sources (edible and nonedible), virgin oil versus waste oil, algae-based biodiesel that is gaining increasing importance, role of different catalysts including enzyme catalysts, and the current state-of-the-art in biodiesel production.