BACKGROUND: Chlorella strains rather than terrestrial oil crops having higher oil content and shorter generation time have been considered as promising candidates for alternative biodiesel. Since the influence of light quality on oil formation of microalgae in either monoculture or mixed culture has been shown to be either inconsistent or ambiguous, a light-emitting diode (LED) photo-bioreactor with different light sources and intensities was used in this study to investigate a cost-effective lipid production process. RESULTS: The oil accumulation in a mixed culture of Chlorella sp. and Saccharomyces cerevisiae was higher than that in the monoculture under the different light sources used. Results of the influence of light quality on the mixed culture indicated that the optimal light wavelength and intensity for biomass formation was red LED light at 1000 lux, whereas the optimum for oil formation was blue LED light at 1000 lux. A novel two-stage LED photo-bioreactor was thus proposed and the highest Pmax and productivity in this study were obtained as 261 mg L-1 and 8.16mg L-1 h(-1), respectively. CONCLUSION: A novel two-stage LED photo-bioreactor using a mixed culture to optimize microalgal oil production was proposed and successfully demonstrated in this study. (C) 2011 Society of Chemical Industry