This study evaluates the sustainability of biodiesel for transport in Thailand in terms of the availability of fresh fruit bunches (FFB) and crude palm oil (CPO) supply to satisfy the future demands for food and fuel, and the contribution of palm biodiesel to mitigating climate change if biodiesel induces land-use change (LUC). Five land conversions including rubber, cassava, paddy field, set-aside land, and forest land to oil palm are considered along with their displacement effects to other land types to evaluate the greenhouse gas (GHG) emissions associated with the direct and indirect land-use impacts. The net feedstock balance reveals that the policy to expand 0.4 million hectare (Mha) for new oil palm plantations accompanied with an increase of FFB yield to 22 megagrams per hectare (Mg/ha) by 2012 would help avoid a CPO shortage; however, this increase in land use needs to be strongly encouraged. The GHG analyses show a wide range of net GHG balances compared to diesel depending on which type of land is converted and which options are used to treat the oil palm wastes. Except for forest land conversion, direct LUC emissions from converting other lands to oil palm will render benefit to the GHG balance of biodiesel. Indirect LUC emissions through crop displacements, however, will generally worsen the balance. Several recommendations are therefore suggested for sustainable palm biodiesel production in the future.