Palm oil mill effluent (POME) was used to culture Chlorella vulgaris UMACC001 in 5-litre, artificially illuminated airlift annular photobioreactors. Hydrodynamic and mass transfer characteristics were investigated for spargers perforated with different pore diameters. Maximum volumetric mass transfer coefficient and gas hold-up were achieved using sparger with 1 mm pores. The sparger was later used in the three-factor growth studies, i.e. irradiance, aeration rate and POME concentration, designated using five- level central composite design. Results showed the chlorophyll-a (Chl-a) content and specific growth rate (μ) ranged from 0.26 to 25.40 mg litre-1 and 0 to 1.033 per day, respectively. The response surface model concluded that increasing irradiance while maintaining the aeration rate and POME concentration indicates the light remained the limiting factor during experimentation. POME concentration and irradiance were found to significantly affect the Chl-a production, whereas the aeration rate was responsible for the μ. The optimised biomass contained 22.0 wt% of lipid, of which 57.0% of the fatty acids was saturated, 26.9% monounsaturated and 16.1% polyunsaturated. The predominant components, i.e. palmitic acid (C16:0), myristic acid (C14:0), stearic acid (C18:0) and eruric acid (C22:1) indicated that the biomass is a suitable feedstock for biodiesel production.