Lipase-catalyzed transesterification of olive oil with ethanol to produce biodiesel was studied. Operation optimization with low cost lipase, Lipase OF, was proposed. The conversion was low because Lipase OF had low resistance for ethanol. To prevent deactivation, a hydrolysis-esterification two-stage system was employed. Ethanol was added in three ways, adding at once, dividing ethanol into 3 and continuous feed. Introducing ethanol continuously by a pump had the highest conversion. Also diluted ethanol improved the conversion. Fermentation raw ethanol can produce almost the same amount biodiesel as the diluted reagent.