Abstract: The petroleum based fuels used for Internal Combustion Engines steadily achieving a steep pricing demand because of the Industrialization of the world. These petroleum based fuels are obtained from limited resources. These limited resources are highly concentrated in certain region of the world. So, countries not having these resources are facing energy/ foreign exchange crises mainly due to the import of crude petroleum. Hence, it is necessary to look for alternative fuels which can be produced from resources available locally with in the country such as alcohol, biodiesel, vegetable oil etc. The present paper attempts to review critically on the aspects of production, characterization and the status of vegetable oil and biodiesel. This paper also reviews the experimental research work carried out on these fuels in various countries. The world resources of primary energy and the raw materials are limited. According to an estimate the reserves will lost for 218 years for coal, 41 years for oil, and 63 years for natural gas. The global population of motor vehicles on the roads to day is ½ a billion which is more than 10 times higher than what was in 1950.