Pakistan has a strong potential of biodiesel production if the available feedstock resources are used sustainably and implementable policies are made in appropriate direction. To meet the energy demands and to find alternative and non-conventional resources of energy different challenges like research and development, infrastructure development, decentralized type of power delivery system, commercialization, market development, education and outreach programs, public awareness, monitoring, subsidies, government participation, technology transfer and evaluation must be considered and a comprehensive policy must also be made to systematically control and integrate them at national level. Pakistan is enriched with a wide variety of feed stocks which can be used for biodiesel production. Pakistan has an enormous potential of biodiesel production from jatropha, plants seed oil and microalgae which needs more consideration and practical applications. Harvesting the potential of microalgae for biodiesel production in Pakistan can be helpful to make it selfsufficient for energy demands. Pakistan is also facing several challenges like climate change, lack of financial resources, state of art technology and absence of appropriate government policies, which limit the commercialization of biodiesel. Although Government of Pakistan has established different institutions to promote and develop alternative energy technologies and to achieve 10% share of bioenergy in the energy sector by 2020, but still the targets are to be achieved on practical grounds. In this article, we have reviewed the potential of biodiesel in Pakistan, feed stocks, biodiesel production process, barriers and future developments. Future policies on biofuels, trends, recommendations, and the implication of existing policies are also discussed with research and developments goals for the promotion of biodiesel in Pakistan