Glycerol, a by-product from transesterification, is well-known as one of the factors inhibiting the reaction. Previous works have mostly shown that the reaction rate slows to a near-steady state and eventually reaches chemical equilibrium. This work aimed to study the inhibiting behavior of glycerol on the transesterification of palm oil. Observation under an LCD digital microscopy showed that glycerol-coated droplets of catalyst-methanol dispersed in the triglyceride phase. This work proposes that glycerol inhibits transesterification by the following mechanism: Droplets of catalyst-methanol disperse into the triglyceride phase; the reaction takes place at an interphase called the reactive zone; methyl ester, the desired product, has low polarity and moves to the triglyceride phase, whereas glycerol, the non-desired product, is more highly polar and accumulates on the droplet surface of catalyst-methanol droplets, inhibiting triglyceride mass transfer and diluting the concentration of the catalyst-methanol. The triglyceride mass transfer coefficient and reaction rate constant were both investigated and expressed as the exponential function.