Biofuels from microalgae are being considered as an alternate renewable energy to fossil fuels, which could extinct by the year 2050 due to its exhaustive usage. Microalgae are tiny cell factories that accumulate large amount of lipids under nutrients starvation, which are sustainable sources for biofuels production. In this study, hydrolysate of lignocellulosic biomass (LCB) was used as a carbon source to improve the production of microalgal biomass, which was further subjected to nitrogen starvation for the enhanced lipid accumulation. The lipid content of LCB supplement 3% and 2% grown cultures of Dictyococcus sp. VSKA18 and Coelastrella sp. M-60 were 44% and 52%, respectively. Further, recovery of fatty acid methyl esters (FAME) was achieved using two different catalysts such as acid (homogeneous) and iron nanoparticles (heterogeneous) synthesized using Sargassum polycystum. Moreover, the saturated fatty acid (SFA) of Dictyococcus sp. VSKA18 and Coelastrella sp. M-60 supplemented with 3% of LCB hydrolysates along with N starvation had yielded 90% and 28% respectively. Fuel quality parameters were also analyzed and compared with ASTM and European standards. Thus, the synthesized bio-iron nanoparticles mediated FAME conversion would be a suitable choice for improving biodiesel production.