Fish oil, containing quite a large amount of polyunsaturated fatty acids (PUFAs), is well-recognized as a good source for biodiesel and health care product production. A two-step process involving free lipase NS81006-mediated methanolysis followed by immobilized lipase Novozym 435-catalyzed conversion was proposed for the utilization of fish oil in this paper. During the lipase NS81006-catalzyed methanolysis process, the selectivity of lipase on different free fatty acids (FFAs) was studied systematically, and it was found that the length of the carbon chain and the number and position of C-C double bonds had a varied influence on the selectivity of lipase. The reaction rate and biodiesel yield decreased with the increase of the carbon chain length; higher conversion could be obtained with unsaturated FFAs (C18:1, C18:2, and C18:3) compared to unsaturated FFA (C18:0), among which FFA with three double bonds gave the highest conversion. Through this two-step lipase-mediated catalysis, both the conventional FFAs and PUFAs could be converted to their corresponding fatty acid methyl ester (FAME) effectively and a FAME yield of over 90% was obtained. The studies provide a rational guidance for biodiesel production as well as the enrichment of PUFAs.