Abstract Pongamia residue (shells) is the byproduct from the biodiesel processing industry, which is a lignocellulosic biomass material. It is not suitable as feedstock in downdraft wood gasifier due to low bulk density (146 kg/m3) of shells as compared to wood (more than 350 kg/m3). Pelletization and gasification of pelletized shells was carried out in the present work. The heat transfer analysis in pellets of 17 mm and 11.5 mm was also carried out to evaluate thermal properties of this biomass. Shell pellets of 17 mm and 11.5 mm diameter and length in the range of 10–60 mm were gasified in a 20 kWe downdraft wood gasifier. The complete gasification of pellets with 17 mm diameter could not be achieved because of less porosity and presence of larger thermal gradient within the pellets. The gasification efficiency was 73% for 17 mm diameter pellets which is lower than that of 11.5 mm diameter pellets which was 95%. The calorific value of producer gas generated from smaller diameter pellets was higher (4.66 MJ/N m3) as compared to larger diameter pellets (3.98 MJ/N m3). Tar formation during gasification of smaller diameter pellets was low as compared to larger diameter pellets.