Biodiesel is an attractive alternative source of biofuel among all available renewable energies. Chemical-based conversion of feedstock into fatty acid methyl esters (FAMEs), a nonpurified form of biodiesel, is resulting into non-environmental-friendly as it generates higher amounts of waste and requires large quantities of water to clean up the fuel. Lipase enzyme has the ability to convert oil/fat into FAMEs at ambient conditions and generates less waste with respect to the chemical-based methods, thereby decreasing overall process cost. However, lipase-catalyzed biodiesel production is still an immature process which requires detailed understanding of the process at various levels. This chapter details various factors involved in lipase-catalyzed biodiesel production and the challenges involved in developing a successful process.