In this work, Pseudomonas cepacia lipase immobilized on cellulosic polyurethane was used as a catalyst for biodiesel production via trans-esterification reactions in order to provide cost-effective methods of enzyme recycling. The efficacy of the immobilized enzyme catalyst at low loading (6.2 wt %) and the effects of temperature, water content, and reaction time in model trans-esterification of glyceryl trioctanoate were investigated extensively. It was found that water was necessary for the reaction of glyceryl trioctanoate with ethanol to proceed. A high conversion of glyceryl trioctanoate (∼70%) was obtained at 35 °C, with only 5.0 wt % of water content over a reaction period of 12 h.