AbstractMagnusiomyces capitatus A4C, a mycelium‐forming and lipase‐producing yeast‐like fungus, was employed in a five‐level factorial design to optimize the collective and interactive influences of carbon, nitrogen and emulsifying sources and their possible effects on cell‐bound lipase (CBL) and cell biomass production. The cell culture of M. capitatus A4C was incubated along with biomass support particles (BSPs) to immobilize the enzyme while anchoring CBL on their surfaces. Among the BSPs tested, CBL immobilized on loofah sponge under optimized conditions showed a substantial hydrolytic activity of 12.7 U mL−1 and a cell‐loading capacity of 0.61 g g−1 of BSPs. Immobilized CBL was applied for biodiesel production via transesterification and esterification. The conversion percentage of triacylglycerides was approximately 100% at 24 h with the addition of water at 1:1 (v/v). The conversion of oleic acid into biodiesel via esterification was 100% at 48 h in the presence of 15% (v/v) isooctane. Further, biodiesel production was scaled up using a packed bed reactor. The batch production of biodiesel in a packed bed reactor through transesterification was 96.2%, with a circulation flow rate of 5.5 mL min−1 for 18 h. On the other hand, oleic acid conversion into biodiesel via esterification was 99.5%, with a circulation flow rate of 5.5 mL min−1 for 24 h. Further investigation revealed that the immobilized biocatalyst exhibited higher stability with esterification (85.3% fatty acid methyl ester) after ten repeated cycles.