Presently the world is facing the problem of scarcity of fossil fuel as it is a non-renewable source of energy. Biodiesel can be an alternative energy source having the advantage of being renewable as well as environment friendly. Enzymes are better catalysts for the production biodiesel as enzymes are more stable and their production is more convenient and safer. Microalgae Scenedesmus sp. was used as a feedstock for biodiesel production. Lipase producing bacteria was isolated from the pulp and paper mill and identified as Microbacterium sp. using 16S rDNA sequencing method. Lipase enzyme was purified by sequential methods of ammonium sulphate precipitation and Sephadex G-100 gel column chromatography. The molecular weight of purified enzyme was 40 kDa on SDS-PAGE. This purification procedure resulted in 2.1fold purification of lipase with a 20.8% final yield. The purified lipase exhibited maximal hydrolytic activity at a temperature of 50 0C and a pH of 8.5. The Km of lipase was 3.2mM and the Vmax 50μmol/min/mg. Lipase activity was stimulated by Triton X-100 and SDS and inhibited by Tween 20 and Tween 80. Biodiesel was prepared through sodium hydroxide, potassium hydroxide and Lipase (Celite and charcoal bound as substrate) catalyzed transesterification process, which enabled a yield of 72.5%, 90% (95.1%, and 15.5%) respectively determined by gas chromatography/mass spectrometry (GC/MS) analysis.