Various alternatives have been exploited to produce biofuels economically and to reduce the environmental impacts with sustainable biowaste management. Lipids are valuable energy rich compounds that has the potential to replace conventional fossil fuels through the production of biofuels. Oleaginous microorganisms contain significant amount of microbial lipids consisting of special fatty acids with varied applications as food additives and nutraceuticals. Biofuels produced from microbial lipids as a third generation feedstock are a promising substitute for fossil fuels and animal fats or vegetable oils. However, the development and scalable production of biofuels from microbial lipids is yet to be commercialized and intensive research is required to evaluate the lipid extraction approaches for optimum biofuel production. In this chapter, we describe the sources of microbial lipids, factors that affect the microbial lipids production, technologies for microbial lipids conversion into biofuels. Alternative and innovative techniques for biofuel production and the life cycle impact of biofuel production from microbial lipids are also discussed.