<P><B>Abstract</B></P> <P>Lipase (<I>Candida</I> sp. 99–125) was immobilized by a two-step process, adsorption and subsequent entrapment. The formation mechanism of immobilized lipase was investigated by SEM and EDS. With the support of diatomite, the internal network of immobilized lipase showed more porosity and was fully developed. The dimension of the network was more uniform in the present of gelatine. The maximum biodiesel yield was 92% at 40 °C in a 24 h reaction. The biodiesel yield was maintained at about 70% after 11 repeated batch reactions. This enzyme immobilization method has potential applications in biodiesel and other lipase catalyzed synthesis process.</P> <P><B>Highlights</B></P> <P> <UL> <LI> Immobilized lipase could be reused 11 times while the biodiesel yield remained in excess of 70%. </LI> <LI> A two step lipase immobilization was developed to convert waste cooking oil to biodiesel. </LI> <LI> Underlying mechanisms associated with the two-step immobilization processes were established. </LI> <LI> Formation mechanism and internal structure of the immobilized lipase was explored. </LI> <LI> Gelatine had a positive effect on the enzyme activity and immobilized stability. </LI> </UL> </P> <P><B>Graphical abstract</B></P> <P>[DISPLAY OMISSION]</P>