The process of biodiesel from drainage oil was analyzed. The two-step method of biodiesel production process was discussed. Main processes such as pretreatment of raw material, esterification reaction, transesterification reaction and separation of reaction products etc. were mainly discussed; some problems that should be paid attention in production process were analyzed. It was pointed out that using drainage oil as raw material can steadily produce high quality biodiesel production as well as make biodiesel production a good efficiency, at the same time the reuse of drainage oil will help achieve circular economy.