The clean energy demand and limited fossil fuel reserves require an alternate source that is sustainable and eco-friendly. This demand for clean energy steered the introduction of biofuels such as bioethanol and biodiesel. The third-generation biodiesel is promising as it surpasses the difficulties associated with food security and land usage. The third-generation biodiesel comprises biodiesel derived from oil produced by oleaginous microbes. The term oleaginous refers to microbes with the ability to accumulate lipids to about 20% of the biomass and is found in the form of triacylglycerols. Yeasts can be grown easily on a commercial scale and are amenable to modifications to increase single-cell oil (SCO) productivity. The oleaginous yeast L. starkeyi is a potential lipid producer that can accumulate up to 70% of SCO of its cell dry weight under optimum conditions. Compared to other oleaginous organisms, it can be grown on a wide range of feedstock and a good part of the lipid produced can be converted to biodiesel. This review presents the recent advances in single-cell oil production from L starkeyi and strategies to increase lipid production are analyzed.