Microalgal biomass is a renewable, carbon-neutral resource and an excellent alternative to petroleum footed fuels. In this work the open outdoor raceway pond system was used for the cultivation of Chlorella vulgaris. The biomass productivity was 31.5 mg L-1 d(-1) and lipid content 25 +/- 5% when cultivated in low cost medium (Urea, Superphosphate and Potash at 91.9, 72.9 and 62.7 mg L-1 where the pH was 8.03) formulated by RSM. The highest FAME yield was 67% under the optimized conditions of H2SO4 at 4%; reaction time at 4 h; methanol-hexane as co-solvent in the ratio of 2:1; and temperature at 80 degrees C for 100 mg of algal lipid. The DU, LCSF, CFPP, CN, PP, CP of the biodiesel evidenced high quality, which corroborate with International standards. The diesel engine performance showed a blend of B50 which is superior in quality compared to B20 and B40 blends and the commercial diesel. Furthermore, reduction of brake-specific fuel consumption at 100% load showed 273.9 gficW h in B50 whereas for commercial diesel it was 275 gikW h. There was 40-55% reduction of CO, HC, and emissions compared to commercial diesel. Thus, this research emphasizes that microalga-based biodiesel is cost-effective and eco-friendly choice for biodiesel. (C) 2018 Elsevier Ltd. All rights reserved.