Algae are known to be a potential feedstock in the production of biodiesel fuel. Although much of the focus has been on microalgal species, macroalgae are also suitable as a source of lipids. In this study, a locally abundant (central Illinois) filamentous algae has been harvested from a water treatment plant; dried to about 10% of its initial weight; pulverized in a hammermill; and treated with methanol to extract the oil. The algae are a combination of several coexisting species including Cladophora sp. and Rhizoclonium. Oil yields ranged from 3% to 6%, by weight, of the dried mass. This oil was reacted by transesterification to yield fatty acid methyl esters (biodiesel fuel) with an overall mass conversion efficiency of 68%. A B5 blend of this algal biodiesel and petrodiesel was run in a 13.4-kW test engine. Measurements indicated similar performance compared to pure petrodiesel in terms of fuel efficiency and carbon dioxide and carbon monoxide exhaust emissions. Significantly, there was a 22% reduction in nitrogen oxides when using the B5 fuel. It has been demonstrated that filamentous macroalgae may be cultivated as biodiesel feedstock and have inherent advantages such as an ability to remove phosphorus and nitrogen compounds from wastewater, simplicity of harvesting, and natural resistance to local aquatic grazers and competing organisms.