Abstract Conversion of palm oil sludge was studied by esterification and transesterification which used methanol as a reactant. The esterification of palm oil sludge was performed by variation of molar ratios of methanol to palm oil sludge (5:1, 10:1, 15:1, 20:1, and 25:1) and percentages of alum catalyst (3–7 wt%) at 60 °C for 3 h with stirring rate 300 rpm. Transesterification was also carried out by variation of KOH (0.5–2.5 wt%) at 60 °C and stirring rate 300 rpm for 1 h. The optimum molar ratio of methanol to palm oil sludge was 20:1 (6% alum catalyst). Meanwhile, the optimum concentration for transesterification was 1.5% of KOH. The yield of biodiesel production was 93%, the density and kinematic viscosity were 0.864 g mL−1 and 12.8 mm2 s−1, respectively. The existence of ester compounds in the product was shown by Fourier Transform Infrared Spectrometry spectrum data of carbonyl group (CO) at 1744 cm−1 and CO of ester at 1234; 1119 and 1026 cm−1. Gas Chromatograph-Mass Spectrometry analysis showed the biodiesel product contains palmitic acid methyl ester (23.4%), trans-methyl oleate (75.5%), cis-methyl oleate (< 0.1%), and methyl stearate (1.2%).