Transesterification yield of biodiesel preparation depends on interfacial area which can be increased by adding a certain amount of water. In base-catalyzed transesterification of fats or vegetable oils with methanol to produce biodiesel, the presence of even small amounts of FFAs and water has negative effect on biodiesel yield since their presence causes soap formation, consumes catalyst and reduces catalyst effectiveness. However, in catalyst-free production of biodiesel from vegetable oils under supercritical methanol condition, the presence of water did not have a significant effect on yield, as complete conversions were always achieved regardless of water content. In fact, the presence of a certain amount of water can enhancemethyl esters formation. For vegetable oil containing water,transesterification, hydrolysis of triglycerides and methyl esterification of fatty acids proceeded simultaneously. Similar phenomenon occurred in the in situ synthesis of biodiesel from Y. lipolytica biomass when water–methanol mixture was used under subcritical condition in this work. An increase in yield was observed when the amount of water was raised from 0 mL to 0.5 mL/g biomass. However, further increase to 1.0 mL/g biomass resulted in a slight reduction in the biodiesel yield. Excess water in the reaction mixture favors the hydrolysis of FAMEs into FFAs and methanol.