Advanced two-step biodiesel production process, consisting of hydrolysis of oil to FFAs in subcritical water, and subsequent esterification of FFAs into FAME in supercritical methanol, was investigated. The aim was to examine the influence of reaction parameters on the effectiveness of hydrolysis, as well as to determine the relationship between the degree of completion of hydrolysis and FAME yields. Experiments were conducted in a batch reactor under various reaction conditions, and the optimal reaction parameters for hydrolysis were determined. Research results indicate that high FFA yields (98 wt%) are achieved at 12 MPa and 250 degrees C and 1:20 oil-to-water molar ratio. These reaction conditions are optimal in terms of FFA yields and process economics. Results revealed a positive correlation between FFA content of the product, FAME yields and rate of methyl esterification. With the two-step procedure same or higher FAME yields can be achieved at milder conditions as compared to the single-step procedure. (C) 2015 Elsevier B.V. All rights reserved.