Animal fat wastes from meat and leather industries have been currently recognized as good feed stocks for the production of biodiesel due to their high fat content and less competition with food products. Utilization of those industrial wastes for energy production has additional environmental protection purposes. This thesis study aims at optimization of process variables on biodiesel production by using oils extracted from meat and leather industry animal fat wastes. Bones and other trimmings from meat industries and limed fleshing wastes from leather industries were collected from Bahir Dar slaughter house and Habesha Tanning PLC, Bahir Dar, Ethiopia. Limed fleshing wastes were de-limed using 1% boric acid (weight basis on fleshing waste), dried, chopped and subjected to thermal extraction of oil along with other wastes. The extracted oil was characterized and degummed. The degumming was achieved by treating the oil with 2% v/v phosphoric acid and 3% v/v distilled water. The degummed oil was characterized and since the FFA level of the oil was greater than 1%, acid catalyzed esterification, achieved by treating the oil with 2% H2SO4 and 6:1 methanol to oil molar ratio, was necessary prior to base catalyzed transesterification. The FFA level of the oil was reduced to 0.76% during esterification process, further reduced to 0.575% through the neutralization process of the esterified oil. After the transesterification process the mixture of catalyst, excess methanol, glycerol and biodiesel was separated using separating funnel. The effect of parameters such as methanol to oil molar ratio, reaction temperature and amount of catalyst used were investigated in this study. Finally, the optimum operating parameters were methanol to oil molar ratio, 6:1, reaction temperature, 60oC and amount of catalyst used 0.75% (weight basis on mass of oil).