The study was aimed at producing bio-diesel from lipids accumulated by micro-organisms grown in distillery wastewater. The raw waste was inoculated with Metschnikowia pulcherrima and was grown under varying conditions of pH, temperature, culture times etc. The raw wastewater had a COD of 86 g/l and total dissolved solids of 46.9 g/l. The conditions for maximum growth were analysed for the available C/N ratio of 11.4. The culture conditions for maximum growth were found to be pH 6.2, 300 C and 120 hours. The lipid extraction was done and lipids were used for Bio-diesel conversion. In-situ trans-esterification reaction was effected by base-catalysis using NaOH and methanol to form fatty acid methyl esters. The yield reached up to 1.4 g/l.