Microorganisms are known to be natural oil producers in their cellular compartments. Microorganisms that accumulate more than 20% w/w of lipids on a cell dry weight basis are considered as oleaginous microorganisms. These are capable of synthesizing vast majority of fatty acids from short hydrocarbonated chain (C6) to long hydrocarbonated chain (C36), which may be saturated (SFA), monounsaturated (MUFA), or polyunsaturated fatty acids (PUFA), depending on the presence and number of double bonds in hydrocarbonated chains. Depending on the fatty acid profile, the oils obtained from oleaginous microorganisms are utilized as feedstock for either biodiesel production or as nutraceuticals. Mainly microalgae, bacteria, and yeasts are involved in the production of biodiesel, whereas thraustochytrids, fungi, and some of the microalgae are well known to be producers of very long-chain PUFA (omega-3 fatty acids). In this review article, the type of oleaginous microorganisms and their expertise in the field of biodiesel or omega-3 fatty acids, advances in metabolic engineering tools for enhanced lipid accumulation, upstream and downstream processing of lipids, including purification of biodiesel and concentration of omega-3 fatty acids are reviewed.