Paper mill sludge (PMS) was assessed as cheap renewable lignocellulosic biomass for lipid production by the oleaginous yeast Cryptococcus vishniaccii (MTCC 232). The sonicated paper mill sludge extract (PMSE) exhibited enhanced lipid yield and lipid content 7.8 +/- 0.57 g/l, 53.40% in comparison to 5.5 +/- 0.8 g/l, 40.44% glucose synthetic medium, respectively. The accumulated triglycerides (TAG) inside the lipid droplets (LDs) were converted to biodiesel by transesterification and thoroughly characterized using GC-MS technique. The fatty acid methyl ester (FAME) profile obtained reveals elevated content of oleic acid followed by palmitic acid, linoleic acid and stearic acid with improved oxidative stability related to biodiesel quality. (C) 2016 Elsevier Ltd. All rights reserved.