In this present work nanocomposite composed of Mn-ZnO capped with Poly Ethylene Glycol (PEG) was utilized as heterogeneous catalyst for the transesterification of oil extracted from Nannochloropsis oculata into biodiesel using methanol as an acyl acceptor. The synthesized Mn-ZnO novel nanocomposite capped with Poly Ethylene Glycol (PEG) was characterized by using SEM and XRD. Lipid contents from the microalgae were extracted by sonication and biphasic solvent method. The process parameters involved for heterogeneous catalysis of N. oculata to biodiesel were optimized and found to be oil to methanol molar ratio of 1:15 (mol:mol), catalyst loading 3.5% (w/w) and reaction temperature of 60 degrees C for 4 h of reaction time by Response Surface Method. The reusability studies showed that the nano-catalyst can be reused efficiently for 4 cycles. The yield of biodiesel obtained from N. oculata species using Mn-ZnO nanocomposite capped with PEG was 87.5%.