Sewage sludge (SS) can be used as a fantastic source of organic compounds instead of being considered as a waste. Thus, these compounds could be converted into microbial lipids (ML) by oleaginous microorganisms, these biolipids being used as raw material for the sustainable production of biodiesel. Nevertheless, the organic compounds are trapped in the complex structures of the sludge flocs. Therefore, in this study an integrated process of sludge management was developed to produce ML as a valuable alternative to oils from agricultural sources. In this sense, wet oxidation (WO) was used as a pre-treatment process of SS in order to maximise the generation of volatile fatty acids (VFAs) mainly acetic and propionic acids. Thus, the liquid fraction was employed as a substrate to produce biolipids by Yarrowia lipolytica, without adding any kind of (micro)nutrients. The optimum conditions for the VFA generation were found to be 205 °C and 120 min, obtaining a concentration of acetic and propionic acids of 4323 ± 112 mg/L and 565 ± 25 mg/L, respectively. Besides, during the WO, ammonium nitrogen was also released, which is a vital nutrient in the metabolism of the oleaginous yeast for cell proliferation. Regarding the fermentation with Y. lipolytica, the best pH value was established at 6.5. Under these conditions, 95% of acetic acid and 100% of propionic acid were metabolised by the yeast. This implied that approximately 30% of the organic carbon present in the oxidised SS was transformed into biolipids in 48 h of cultivation. High lipid content and lipid yield coefficient (YL/S) were achieved using VFAs derived from SS, the values being 35 ± 1% and 0.23 ± 0.02 g/g, respectively. The lipid profile mainly contained monounsaturated fatty acids, such as oleic acid (46.4 ± 0.4%), making it an interesting raw material for biodiesel production. Therefore, the proposed strategy can be a promising approach to produce clean biofuels from SS.