Vegetable oils are the most suitable renewable feedstock for biodiesel production, in particular palm oil which has unique characteristics, stability and attractive price. Besides the fresh vegetable oils, used frying oil (UFO) can also be used to make an equally good product. MPOB has investigated palm olein-derived UFO for biodiesel production since 2001 employing an additional pre-treatment using silica gel prior to transesterification of UFO, which increased the production cost. Alternative approaches focusing on cost improvement are being sought. This study found that direct alkali transesterification (DAT) is possible, preferably with UFO having low free fatty acids (FFA) content. The undistilled methyl esters (ME) produced have comparable physicochemical and fuel properties with an exceptionally better yield, are more stable against oxidation and have higher heat of combustion. The ME conversion exceeded 98% and the UFOME purity was 96.5%. The UFOME produced had properties comparable to petroleum diesel and can be used as a diesel substitute. Distillation of UFOME was conducted to further improve its colour, yielding a novel UFOME (UFOMEDAT distilled). However, while the distilled UFOME had similar fuel properties with those of the undistilled UFOME, its oxidative stability was reduced to an induction period of 4.13 hr, below the compliance level of the European Standard specification EN 14214.