Vegetable oil is one of the main first generation liquid biofuels. The fuel characteristics of vegetable oil such as viscosity and atomization cannot be accommodated by existing diesel engines. An alternate process has been developed to improve the fuel characteristics of vegetable oils through the process of alcoholysis to produce a fuel called biodiesel. It can be used in engines as substitute for fossil fuel. This paper reviews the characteristics of different oils available for biodiesel production and the production technologies, engine performance using vegetable oil and biodiesel, and emission studies. Copyright © 2014 John Wiley & Sons, Ltd.