An experimental research on production of biodiesel from lipids of chlorella vulgaris has been done through transesterification reaction process. The series of chlorella vulgaris cultures has been carried out and the optimum growth time was determined. The biodiesel synthesis is processed by two steps i.e., isolation of chlorella vulgaris lipids and the synthesis of biodiesel from lipids. The objective of the study was to develop a simultaneous waste water treatment system and the production of renewable energy by utilizing the algal growth. Biofuel batch scale experiments with 10% and 15% dilution of municipal waste water were carried out in this study. The total lipid content of algal biomass ranged from 7.5 to 28.5%. The approximate proportions of chloroform, methanol and water in the upper phase was found to be in the ratio of 3:48:47 by volume and the lower phase mixture proportion was found to be 86:14:1. The concentration of biomass reached a maximum value of 920 mg/L measured in terms of VSS. The nutrient removal, which was achieved to nearly 100% weight of biodiesel yield per biomass of chlorella vulgaris, was 49.7%. The viscosity values and heat of combustion of the biodiesel were 1.14 g/cm3 and 42.50 KJ/g respectively.