A study was undertaken to examine the effect of temperature, moisture and storage time on the accumulation of free fatty acid in the rice bran. Rice bran stored at room temperature showed that most triacylglyceride was hydrolyzed and free fatty acid (FFA) content was raised up to 76% in six months. A two-step acid-catalyzed methanolysis process was employed for the efficient conversion of rice bran oil into fatty acid methyl ester (FAME). The first step was carried out at 60 degrees C. Depending on the initial FFA content of oil, 55-90% FAME content in the reaction product was obtained. More than 98% FFA and less than 35% of TG were reacted in 2 h. The organic phase of the first step reaction product was used as the substrate for a second acid-catalyzed methanolysis at 100 degrees C. By this two-step methanolysis reaction, more than 98% FAME in the product can be obtained in less than 8 h. Distillation of reaction product gave 99.8% FAME (biodiesel) with recovery of more than 96%. The residue contains enriched nutraceuticals such as gamma-oryzanol (16-18%), mixture of phytosterol, tocol and steryl ester (19-21%). (c) 2005 Elsevier Ltd. All rights reserved.