This study reported on a biological treatment system for wastewater discharged from small-scale alkali-catalyzed biodiesel (BDF) production plant. BDF wastewater is normally highly alkaline, contains oil residues with hexane and low in nitrogen concentrations, inhibiting the growth of microorganisms. Due to this unfavorable condition, biological treatment is difficult. In this study, microbial treatment using Rhodotorula mucilaginosa, a yeast with the ability to degrade oil was applied by adjusting the BDF wastewater pH to 6.8 and providing several nutrients such as nitrogen source (ammonium sulfate, ammonium chloride or urea), yeast extract and physiological saline. It was found that the optimal initial concentrations of yeast extract was 1g/L and the optimal C/N ratio was between 17 and 68 when using urea as nitrogen source. However, microorganisms could not grow at solid contents higher than 2.14 g/L in the BDF wastewater. Dilution was introduced to prevent growth inhibition and the best oil degradation was observed. This biological treatment system is simple and suitable for small-scale BDF plant as no controllers are needed, except for suitable temperature.