Most conventional processes for algal biodiesel production involve separate lipid extraction steps or require usage of dry biomass that incurs extra cost and an energy intensive drying step. A novel process that involves dehydration of wet biomass via pretreatment with ethanol followed by direct in situ transesterification into biodiesel was investigated in this study. Under mild esterification at 80 degrees C for 30 min, pretreating the wet biomass twice with 3 volumes of ethanol resulted in a nearly four-fold increase of fatty acid ethyl ester (FAEE) yield from 3.04 mg to 11.78 mg, while increasing the ethanol from 1 volume to 10 volumes resulted in a six fold increase of yield from 3.18 to 18.29 mg. The FAEE yield further increased when the esterification reaction was run at higher temperature and longer durations of up to 120 degrees C for 2 h. The overall positive impact of the pretreatment step on the final yield was far greater for milder reaction conditions, which makes the process more attractive in terms of economics and energy savings. In addition, it was found that the yield is unaffected by the choice of alcohol, which means methanol and butanol can also be used for the process. Lastly, it was found that the low concentration of water in the FAEE containing spent ethanol meant that both the solvent and sulfuric acid could be reused to further concentrate the quantity of FAEE in the final product mixture.