The study of solid basic catalyst is a promising route for developing a better understanding and contributes to the development of better heterogeneous catalytic system capable of carrying the transesterification of oils proficiently under mild reaction conditions in short reaction times. This paper reports a simple and flexible method for increasing the activity and improving the properties of calcined natural calcites via a hydration-dehydration approach in order to make them highly suitable for biodiesel production. The ensuing transformations of the calcite during synthesis were monitored by XRD, TPD, BET, and SEM techniques. The characterization results indicate that this synthesis offers a new calcium oxide with less crystallinity. The new CaO has higher surface area and amount of basic sites than CaO generated from the decomposition of calcite. The calcination of calcite changed the pore shape of catalyst but the water treatment did not alter the pore characteristics of CaO. With these characteristics, our CaO exhibits higher catalytic activity than the decomposed calcite as observed from the transesterification of palm olein with methanol. The methyl ester content was enhanced to 93.9 wt.% from 75.5 wt.% of calcined calcite. This present study also provides new fundamental insight into the effect of water on properties and activity of CaO prepared by new hydration and subsequent thermal decomposition method of calcined calcite. (C) 2010 Elsevier B.V. All rights reserved.