The objective is to enhance lipase activity of Mucor circinelloides via atmospheric and room temperature plasma (ARTP). ARTP was employed to treat spores of M. circinelloides for the selection of high lipase producers. With an irradiation time of 100 s at a lethal rate of 95 %, 18 mutants with higher lipase activity were initially selected. Measurements of the lipase activity revealed that a mutant strain LA-26 was characterized by a steady hereditary stability with lipase activity increase to 376.7 U/g. Moreover, the mutant LA-26 was immobilized as whole-cell biocatalyst used in solvent-free system to produce biodiesel. Response surface methodology (RSM) was used to optimize the reaction parameters. With the addition of 8 % biocatalyst, 10 % water content (w/w) and the stepwise addition of methanol (methanol to oil ratio of 4:1), the highest biodiesel (FAME) yield up to 98 % was achieved within 48 h. Immobilized LA-26 can be used for repeated batches, maintaining 70 % FAME yield after 6 cycles. The identified mutant strain LA-26 exhibits great potential for biodiesel production.