Abstract The use of MgO impregnated with KOH as heterogeneous catalysts for the transesterification of mutton fat with methanol has been evaluated. The mutton fat (fat) with methanol (1:22 M ratio) at 65 °C showed > 98% conversion to biodiesel with 4 wt% of MgO–KOH-20 1 (MgO impregnated with 20 wt% of KOH) in 20 min. The reaction conditions optimized were; the amount of KOH impregnation (5–20 wt%), the amount of catalyst (1.5–4 wt%, catalyst/fat), the reaction temperature (45–65 °C), fat to methanol molar ratio (1:11–1:22) and the effect of addition of water/oleic acid/palmitic acid (upto 1 wt%). Although, transesterification of fresh fat (moisture content 0.02 wt% and free fatty acids 0.002 wt%) with methanol in the presence of KOH (homogenous catalyst) resulted in the complete conversion to biodiesel, but in the presence of additional 1 wt% of either free fatty acid or moisture content, formation of soap was observed. The MgO–KOH-20 catalyst was found to tolerate additional 1 wt% of either the moisture or FFAs in the fat.