Hydrolysis of lipids from microalgae under high water content was investigated as a pretreatment of direct esterification. Results indicated that the hydrolysis process reduced the inhibition by water in FAME production; in addition, FAME obtained by esterification of hydrolysates was increased by 181.7% compared to FAME obtained by direct transesterification under the same amount of water content (80%). This method has great potential in terms of biodiesel production from microalgae since it uses no organic solvent, reduces the drying cost and lowers the operating cost compared to any other traditional method. (C) 2013 Elsevier Ltd. All rights reserved.