Biodiesel derived from non-edible Madhuca Indica oil (MIO) seems to be a better alternative to diesel oil in India. In the present work, effects of reaction variables such as mass ratio of methanol to oil, catalyst concentration, reaction time and reaction temperature on biodiesel yield were studied. The acid value of the commercially available MIO is high, and hence a two-step process was used to produce biodiesel from MIO. In the first step, the acid value of the MIO was reduced to less than 1 mg KOH/g, using acid-catalyzed transesterification. In the second step, the pretreated MIO was converted to biodiesel using alkaline-catalyzed transesterification. From the experimental results, it is observed that the optimized conditions for biodiesel production are a 1 : 4 mass ratio of methanol to oil, 55 °C reaction temperature, 120 min of reaction time, and 1% sodium hydroxide catalyst. The properties of the MIO biodiesel were found to be within the biodiesel limits of the European Union. Hence, the MIO biodiesel can be used as a substitute for diesel for the sustainable development of rural areas and as a renewable fuel.