A rather young but rapidly accelerating biofuel industry has recently emerged in China. However, there is no legislation or policy specifically regulating biofuels or bioenergy. In addition, most of the regulatory functions are undertaken by policy initiatives rather than by law. As a result, the regulation and, in a broader context, governance of biofuels still face several major obstacles, including unclear development directions, ignored impact of biofuels development on society, environment and economy, and limited public participation. This paper argues that legislation on biofuels in the form of joint departmental rule is a departure for a comprehensive regulatory framework to overcome the current obstacles and to realize the sustainable development of the biofuels industry in China.