Although biodiesel has been extensively explored as an important renewable energy source, the raw materials-associated cost poses a serious challenge on its large-scale commercial production. The first and second generations of biodiesel are mainly produced from usable raw materials, e.g. edible oils, crops etc. Such a situation inevitably imposes higher demands on land and water usage, which in turn compromise future food and water supply. Obviously, there is an urgent need to explore alternative feedstock, e.g. microbial oils which can be produced by many types of microorganisms including microalgae, fungi and bacteria with the advantages of small footprint, high lipid content and efficient uptake of carbon dioxide. Therefore, this review offers a comprehensive picture of microbial oil-based technology for biodiesel production. The perspectives and directions forward are also outlined for future biodiesel production and commercialization.