Enzymatic transesterification of rapeseed oil with methanol has been carried out in a batch process. Methyl ester is produced in the course of enzymatic reaction. The product is used as biofuel in diesel engine without any further post treatment. There is no serious emission of hazardous particulate matter, since raw material does not contain any impurities such sulfur dioxide. The reaction is carried out under various conditions and the desire operating parameters were determined. In this work the effects of enzyme concentration, methanol to oil molar ratio, water content, type of solvent, volumetric ratio of t-butanol and reaction temperature have been investigated. Maximum methyl ester conversion of 70.32% is obtained for enzyme 6% (w/w of Oil), water 5% (v/v of oil) and methanol to oil ratio of 9:1 at 37 degrees C for 72 h. In order to identify a suitable condition for biodiesel production, different solvents have been used. The highest methyl ester conversion is observed with t-butanol as moderate polar solvent.