In order to overcome the problems regarding the use of pure vegetable oils in diesel engines, these oils can be converted to biodiesel by transesterification with methanol. The end product of this process is a fuel that is similar to fossil diesel. Fuel properties of biodiesel are much better than those of pure vegetable oil in terms of stability, viscosity (although it is still higher than fossil diesel) and cetane number. The volumetric energy content of biodiesel is about 10% lower than that of diesel. An important by-product of biodiesel production is glycerine that can be sold to the cosmetic and pharmaceutical industry. In Europe, the most commonly used biodiesel is Rapeseed Methyl Ester (RME).

However, other vegetable oils can also be used as feedstocks, as well as used fats, such as waste cooking oils from restaurants. Biodiesel can be blended with fossil diesel up to a proportion of 20% without the necessity of adapting the vehicle engine for application of biodiesel. If higher proportions of biodiesel are applied, a number of relatively minor changes are required, such as the use of alternative materials due to the chemical aggressiveness of biofuels towards metallic materials, rubber seals, coatings and elastomers that are used in vehicle engines. Furthermore, there are some implications for handling and storage of biodiesel, since it should be kept away from air and water. Biodiesel is used in low-biofuel blends (typically 5%, in line with the European diesel standard) with fossil diesel, for example, in France, Italy, Germany, and Sweden. Higher proportion blends (France and Czech Republic, blends of 30% and 31% biodiesel, respectively) and pure biodiesel (Germany, Austria) also occur using modified vehicle engines.