Biodiesel is one of the most important renewable forms of energy. The synthesis of biodiesel involves two important steps, namely, lipid extraction from organisms and transesterification of lipids. On transesterification, the triacylglycerides are converted into fatty acid methyl esters (FAMEs) that mimic the energy of petroleum diesel and hence are known as biodiesels. The sources of lipids could be plants, animals, or microbes. Plants and animals take longer time to grow and multiply in addition to occupying a larger space for cultivation. Further, they require a higher investment for large-scale production of biodiesel. Oleaginous organisms have cells that can accumulate lipids intracellularly, more than 20% of cell dry weight. Algae and fungi can act as oleaginous organisms under special conditions. Although algae are potential candidates for biodiesel production, recent studies indicated that some fungi can also act as oleaginous microbes when grown not only on sugars such as glucose and sucrose but also on other carbon sources such as glycerol, paddy straw, molasses, wheat straw, and corn steep. Similarly, some fungi (e.g., endophytic fungi) have been found to convert cellulosic and hemicellulosic substrates directly into biofuel known as mycodiesel. Mycodiesel is composed of organic volatile organic compounds (VOCs) rather than FAMEs derived from transesterification of triacylglycerides. The VOCs that are composed of basic petroleum fuel carbon skeleton could be used in the production of mycodiesel.The backbone of all petroleum fuels is composed of straight-chained hydrocarbons such as hexane, heptane, octane, nonane, and decane in addition to many other ingredients such as branched alkanes, cyclic alkanes, a plethora of benzene derivatives, and polyaromatic hydrocarbons. The production of VOCs comprising short-chain alkane derivatives and other hydrocarbons, closely related to the molecules present in petroleum diesel, was for the first time reported from Gliocladium roseum, an endophytic fungus. Such capabilities were reported from a few other fungi that have been investigated. These studies show that the natural diversity of fungi should be further explored to identity novel oleaginous VOCs producing fungal species that could be potentially grown on agro-industrial wastes, particularly on lignocellulosic biomass. In this chapter the scope, possibilities, challenges, shortcomings, and future perspectives of fungi as promising biofuel resources are discussed.