A novel layered heterogeneous catalyst of hydroxyapatite and phases of calcium phosphate was prepared by two step process from waste animal bone for the synthesis of biodiesel. In the two step method, calcination of the animal bone is followed by hydrothermal reaction, to obtain a heterogeneous catalyst with layered structure. The heterogeneous catalysts were characterized by dynamic light scattering, X-ray diffraction, thermogravimetric analysis, fourier transmission infrared spectra, scanning electron microscopy, atomic force microscopy and Brunauer-Emmer-Teller to understand the behaviour of the materials. The increase in the surface area of the catalyst synthesized by hydrothermal reaction is mainly due to the formation of the layered structure of the material. Biodiesel was prepared by the transesterification of honge oil and methanol, using the heterogeneous catalyst synthesized from raw dried animal bones, by calcination and hydrothermal reaction and yield was compared.The yield obtained for the calcined and hydrothermally treated samples were found to be 88% and 96% respectively. Higher yield was observed for catalyst synthesised by hydrothermal method as compared to that synthesized by calcination which is mainly due to enhanced surface area of the catalyst prepared through two step process. The performance of the catalyst was evaluated by comparing the biodiesel yield obtained. Gas Chromatography-Mass Spectroscopy (GC-MS) was also done for the analysis of biodiesel. The layered heterogeneous catalyst synthesized by hydrothermal reaction of animal bones with better surface area, is an efficient catalyst for the transesterification of biodiesel, with better yield.