This study investigates a lambda cyhalothrin 2.5% (w/w) microemulsion formulation, with biodiesel as an alternative solvent, as a potential pesticide delivery system for oil-soluble pesticide active ingredients (Ads). This study presents a pseudoternary phase diagram of the investigated system, at room temperature by titration, and the surfactant/cosurfactant mass ratios (S/C), the oil-to-surfactant/cosurfactant mass ratios (O/SC) and the optimum formulation. This study also investigates the continuous structural inversion from water-in-oil to oil-in-water microemulsions after dilution with the water phase. The electrical conductivities of the selected system at constant S/C (5:1) and O/SC (1:1.2) ratios with biodiesel were also studied, and the percolation phenomenon was observed. The study examines the performance and stability of a formulation with biodiesel in comparison to commercial formulations. Residue and phytotoxicity tests were carried out on cabbage plants in a greenhouse. Experimental results indicate that biodiesel has good handling characteristics when it forms a microemulsion. The microemulsion formulation, with biodiesel as a solvent, had an acceptable transparent appearance, broader transparency temperature range, and better performance and stability than the commercial formulation. Using biodiesel in a pesticide formulation had no adverse effects on the AI activity and is comparatively safe for crops and plants.