Ionic liquid is a green solvent and catalyst. A new approach of using dimethyl carbonate (DMC) catalyzed by sulfonated imidazolium ionic liquid (SIIL) producing glycerol-free biodiesel was developed. Together with the fatty acid methyl ester (FAME), the other two products fatty acid 1,3-dimethoxypropyl ester and 1,3-dimethoxypropan-2-ol were also generated, which could be used as an oxygenate additive without separation from biodiesel. The overall reaction pathway was resolved upon the product analysis, which could well explain the whole process and product distributions. In this paper, the effects of the molar ratio of DMC/rapeseed oil, catalyst dosage, reaction temperature, and reaction time were explored. The highest yield of FAME with the SIIL catalyst 1-propylsulfonate-3-methylimidazolium hydrogen sulfate ([PrSO3HMIM][HSO4]) reached 95.77% under optimum conditions.