BACKGROUND: The production of biodiesel from activated sludge obtained from Tuscaloosa, AL was optimized based on the yield of fatty acid methyl esters (FAMEs) using an in situ transesterification process. An orthogonal central composite response surface design was considered to investigate the main and interaction effects of temperature, methanol to sludge ratio, and catalyst concentration. RESULTS: The biodiesel yield can be satisfactorily described by the quadratic response surface model with R-2 of 0.836 and a statistically not significant lack of fit (p = 0.254). Coded regression coefficients, main effect plots and surface plots indicated that maximum biodiesel yield may be obtained at 75 degrees C, 30 mL g(-1) (methanol/sludge) and 10% volume (catalyst concentration). Numerical optimization showed that at this reaction condition, a biodiesel yield of 3.78% (weight) can be obtained. Experimental verification gave a biodiesel yield of 3.93 +/- 0.15% (weight) giving a model error of 7.35%. This indicates high reliability of the model. CONCLUSIONS: The economic analysis showed that the in situ transesterification of wet activated sludge (84.5% weight moisture) is less economical than the in situ transesterification of dried sludge (5% weight moisture). However, sensitivity analysis indicated that the process can be made more economical by reduction of water to 50% (weight). At this level of moisture, a biodiesel break-even price of around $7.00 per gallon is attainable, which is still more expensive than petroleum-based diesel (similar to-$2.95 per gallon). For the biodiesel from activated sludge to be economically competitive, a biodiesel yield of at least 10% (weight) is necessary. (C) 2010 Society of Chemical Industry