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Biodiesel refers to a diesel-equivalent processed fuel consisting of short chain alkyl (methyl or ethyl) esters, made by transesterification of vegetable oils or animal fats, which can be used (alone, or blended with conventional diesel fuel) in unmodified diesel-engine vehicles.

In some countries biodiesel is less expensive than conventional diesel.

Space-filling model of Methyl Linoleate, or Linoleic Acid Methyl Ester, a common Methyl Ester produced from Soybean or Canola oil and Methanol.

Space-filling model of Ethyl Stearate, or Stearic Acid Ethyl Ester, an Ethyl Ester produced from Soybean or Canola oil and Ethanol.

Biodiesel is distinguished from the straight vegetable oils (SVO) or waste vegetable oils (WVO) used (alone, or blended) as fuels in some diesel vehicles.

Biodiesel is biodegradable, non-toxic and may produce less greenhouse gas than petroleum based fuel. There is some debate over the size of the greenhouse gas reduction, and this will depend on the choice of feedstock. Recent studies indicate that 60% reduction in net-lifecycle carbon dioxide emissions when compared to petroleum diesel are realistic, and reductions in emissions of smog forming hydrocarbon are 65% less, although the Nitrogen Oxide emissions are about 10% greater than those from petroleum-based diesel.. However, this estimate does not consider land conversion, where natural land is converted to agricultural use. Greenhouse gas emissions could be significantly increased if vegetable oil is sourced from new plantations . There is also concern that using land to grow non-food crops will push up food prices. Biodiesel can be made from almost any oil or fat. Currently vegetable oil is the most common feedstock, but algae could provide a useful source whilst allaying some of the environmental concerns.

Some vehicle manufacturers are positive about the use of biodiesel, citing lower engine wear as one of the fuel's benefits, while others are more cautious. In the UK many only maintain their engine warranties for use with maximum 5% biodiesel — blended in with 95% conventional diesel — although this position is generally considered to be overly cautious., with some manufacturers allowing 100% biodiesel. . Most manufacturers release lists of the cars that will run on 100% biodiesel.

The British businessman Richard Branson's Virgin Voyager train, number 220007 Thames Voyager was converted to run on biodiesel, although an adverse effect occurred when it was proven to reduce reliability and to raise costs of maintenance significantly. Biodiesel can also be used as a heating fuel in domestic and commercial boilers.

Biodiesel can be distributed using today's infrastructure, and its use and production are increasing rapidly. Fuel stations are beginning to make biodiesel available to consumers, and a growing number of transport fleets use it as an additive in their fuel. Biodiesel is generally more expensive to purchase than petroleum diesel but this differential may diminish due to economies of scale, the rising cost of petroleum and government tax subsidies.