NOVELTY - Reducing free fatty acid content of sludge palm oil used for producing biodiesel involves esterification and tranesterification, specifically: (a) preheating the sludge palm oil which containing free fatty acids and triglycerides; (b) esterifying the preheated sludge palm oil; (c) transesterifying the esterified sludge palm oil; (d) separating the crude biodiesel from crude glycerol and alkaline catalyst; (e) washing said crude biodiesel using water; (f) separating the washed biodiesel from the water; and (g) dehydrating the washed biodiesel.    USE - The method is useful for reducing free fatty acid content of sludge palm oil used for producing biodiesel (claimed).    ADVANTAGE - The method has optimum process conditions that are suitable to produce high quality biodiesel using sludge palm oil as the feedstock and to make biodiesel production economically and commercially feasible.    DETAILED DESCRIPTION - Reducing free fatty acid content of sludge palm oil used for producing biodiesel involves esterification and tranesterification, specifically: (a) preheating the sludge palm oil which containing free fatty acids and triglycerides; (b) subsequently, esterifying the preheated sludge palm oil with low molecular weight alcohol in a molar ratio of low molecular weight alcohol to sludge palm oil in the range of 6:1 to 20:1, in the presence of acid catalyst containing a sulfur group, at a temperature in the range of about 40 degrees C to 80 degrees C with stirring speed in the range of about 200 revolutions per minute (rpm) to 400 rpm, for a time sufficient to reduce the free fatty acid content in said sludge palm oil to a maximum of about 2 wt.%, thus forming fatty acid alkyl esters and water, where said resultant sludge palm oil may be further esterified if said free fatty acid content is more than about 2 wt.%; subsequently, separating the esterified sludge palm oil from water; (c) subsequently, transesterifying the esterified sludge palm oil by adding low molecular weight alcohol to the esterified sludge palm oil in a molar ratio of low molecular weight alcohol to sludge palm oil in the range of 6:1 to 14:1, in the presence of an alkaline catalyst at a temperature in the range of about 45 degrees C to 60 degrees C with stirring speed in the range of about 200 rpm to 400 rpm, for a time sufficient to neutralize unreacted free fatty acids in said sludge palm oil and to convert triglycerides in said sludge palm oil to fatty acid alkyl ester, forming crude biodiesel and crude glycerol; (d) subsequently, separating the crude biodiesel from crude glycerol and alkaline catalyst; (e) subsequently, washing said crude biodiesel using water with a temperature in the range of about 50 degrees C to 70 degrees C, forming a washed biodiesel phase and a water phase; (f) subsequently, separating the washed biodiesel from the water; and (g) subsequently, dehydrating the washed biodiesel with or without using a drying agent to form a pure biodiesel.