Biomass is one of the major potentials of renewable energy sources in Serbia. Due to the lack of legal acts, regulations, and incentive systems by the state, this potential has not been sufficiently utilized. According to some estimates, the theoretical potential of biomass in Serbia amounts to about 3.2 million equivalent tonnes of oil. This paper gives an overview of the existing situation in Serbia, including a set of measures necessary to stimulate the production of biofuels, primarily for the purpose of more intensive development of agriculture, reduction of pollution of the environment, reduction of the import of crude oil and for the creation of new jobs. The aim of this paper is to present the possibilities, conditions, and obstacles in the production and use of biodiesel in Serbia, as well as the comparison of the use of biodiesel in the countries of the European Union. Special attention is paid to the economics of production and the ecological motive for the production of biodiesel, as well as the ability to reduce CO2 emissions and the environmental impact of transportation vehicles.