The fuel demand for transportation correlates with a surge in population, and currently, the automotive industry relies heavily on fossil fuels. Diesel and gasoline-powered vehicles, constituting a significant section of the transport industry, emit a substantial amount of carbon dioxide (CO2) and other pollutants, contributing significantly to environmental pollution. This led to intensifying ecological concerns, such as global warming and human health hazards, with the transportation sector considerably contributing to carbon and other harmful emissions. Achieving “carbon neutrality” in the transportation sector presents significant challenges for internal combustion engine vehicles in meeting CO2 regulations. The depletion of fossil fuels depends on new petroleum discoveries, but continued use is unsustainable due to greenhouse gas (GHG) emissions and other environmental concerns. Recent research has focused on alternative fuel development to address these issues. Biodiesel, a renewable alternative fuel, is crucial in reducing fossil fuel dependence, consumption, and greenhouse gas emissions. Eminent concern focuses on the sustainability of alternative fuels, the economic benefits of production, and their environmental impact. Therefore, an in-depth study of agriculture-associated biodiesel production is essential for sustainability. The evaluation of biodiesel production through a life cycle assessment is necessary to gain a comprehensive understanding of its environmental impact and effectiveness as a sustainable fuel option. This study evaluated the multifaceted impacts of biodiesel production based on several factors such as feedstock type, cultivation practices, processing techniques, and transportation methods, analyzing the life cycle assessment (LCA) and life cycle inventory (LCI).