A new green production method of biodiesel fuel (BDF) was developed using fatty acid methyl ester (FAME) as a co-solvent (co-FAME). The co-FAME was prepared from canola oil. The conventional heterogeneous method has been conducted by mixing oil, methanol (MeOH) and potassium hydroxide (KOH) as a catalyst. However, our new homogeneous method was conducted by mixing oil, co-FAME, Me0H, and KOH. The homogeneous reaction system (co-FAME/oil/MeOH) was constructed by adding 20 wt% of co-FAME to oil. The optimum reaction conditions for the BDF production were examined and the following results were obtained; 20 wt% of co-FAME to oil, 5/1 molar ratio of methanol to oil, 1.0 wt% of KOH to oil, and reaction temperature of 30 degrees C. The high quality of BDF with FAME content of 99.2% was obtained. The lower concentrations of residual triglyceride (0.1%), di-glyceride (0.2%) and mono-glyceride (0.5%) were satisfied the criteria of EN 14214 and .TIS K2390 standards. The transesterification using co-FAME could reduce times of reaction and phase separation after reaction, and further could reduce the emission of waste from the system. The FAME produced could be reused as co-solvent. These results suggest that the transesterification using FAME as a co-solvent is an environmentally friendly method for BDF production.