Alternative approaches for obtaining biodiesel from municipal sludge have been successfully investigated. In order to avoid the expensive conventional preliminary step of sludge drying, dewatered sludge (TSS: 15wt%) was used as starting material. The best performance in terms of yield of fatty acid methyl esters (18wt%) with the lowest energy demand (17MJkgFAME(-1)) was obtained by a new two-step approach based on hexane extraction carried out directly on dewatered acidified (H2SO4) sludge followed by methanolysis of extracted lipids. It was found that sulphuric acid plays a key role in the whole process not only for the transesterification of glycerides but also for the production of new free fatty acids from soaps and their esterification with methanol. In addition to biodiesel production, the investigated process allows valorization of primary sludge as it turns it into a valuable source of chemicals, namely sterols (2.5wt%), aliphatic alcohols (0.8wt%) and waxes (2.3wt%).