Acid oil which is a byproduct of vegetable oil industry has been investigated for its suitability as a source of biodiesel, as it is economic and readily available in considerable quantities at most of vegetable oil refinery sites. The biodiesel from acid oil is produced by a new type of "ED3R" esterification process developed at the Institute. Fuel properties of biodiesel thus produced are compared with standard biodiesel and diesel fuel. Blends of biodiesel and diesel fuel are prepared. Fuel property variations of biodiesel blends produced are reported.