From the tannery effluent and oil contaminated soil different colonies of bacteria and fungi were isolated and screened for high lipid content by Sudan black B quantitative method. Among all the isolates fungal strain SF2 showed high lipid content was selected and identified as Aspergillus niger. It was found that the fungi produced about 44.02% of lipid. The fatty acid composition was identified by GC-MS. The physicochemical property of the extracted lipid was analyzed. The effect of both physical and chemical parameters on the lipid production of fungus was studied to find out the optimum production condition. The important variable required for the lipid production was evaluated by Plackett Burman method. The interactions involved among the selected variables for high lipid production were studied using central composite design (CCD) which showed the interaction between the glucose and pH plays an important role in the lipid production.The optimum parameters for the fattyacid methyl ester (FAME) production were investigated in terms of both physical and chemical parameters and the biodiesel yield under optimised reaction condition was 84%.