The use of volatile fatty acids (VFAs) for microbial lipid accumulation was investigated in flask cultures of Cryptococcus albidus. The optimum culture temperature and pH were 25 degrees C and pH 6.0, respectively, and the highest lipid content (27.8%) was obtained with ammonia chloride as a nitrogen source. The lipid yield coefficient on VFAs was 0.167 g/g of C. albidus with a VFAs (acetic, propionic, butyric acids) ratio of 8:1:1, which was in good agreement with a theoretically predicted lipid yield coefficient of the VFAs as a carbon source. The major fatty acids of the lipids accumulated by C. albidus were similar to those of soybean oil and jatropha oil. A preliminary cost analysis shows that VFAs-based biodiesel production is competitive with current palm and soybean based biodiesels. Further process development for lower aeration cost and higher lipid yield will make this process more economical. (C) 2010 Elsevier Ltd. All rights reserved.