The epidemic of bovine spongiform encephalopathy (BSE) has led to a world-wide drop in the market for beef by-products, such as Meat-and-Bone Meal (MBM), a fat-containing but mainly proteinaceaous product traditionally used as an animal feed supplement. While normal rendering is insufficient, the production of biodiesel from MBM has been suggested to destroy infectivity from transmissible spongiform encephalopathies (TSEs). In addition to producing fuel, this method simultaneously generates a nutritious solid residue. In our study we produced biodiesel from MBM under defined conditions using a modified form of alkaline methanolysis. We evaluated the presence of prion in the three resulting phases of the biodiesel reaction (Biodiesel, Glycerol and Solid Residue) in vitro and in vivo. Analysis of the reaction products from 263K scrapie infected MBM led to no detectable immunoreactivity by Western Blot. Importantly, and in contrast to the biochemical results the solid MBM residue from the reaction retained infectivity when tested in an animal bioassay. Histochemical analysis of hamster brains inoculated with the solid residue showed typical spongiform degeneration and vacuolation. Re-inoculation of these brains into a new cohort of hamsters led to onset of clinical scrapie symptoms within 75 days, suggesting that the specific infectivity of the prion protein was not changed during the biodiesel process. The biodiesel reaction cannot be considered a viable prion decontamination method for MBM, although we observed increased survival time of hamsters and reduced infectivity greater than 6 log orders in the solid MBM residue. Furthermore, results from our study compare for the first time prion detection by Western Blot versus an infectivity bioassay for analysis of biodiesel reaction products. We could show that biochemical analysis alone is insufficient for detection of prion infectivity after a biodiesel process.