Biodiesel production from vegetable oils is not sustainable and economical due to the food crisis worldwide. The development of a cost-effective non-edible feedstock is essential. In this study, we proposed to use aquatic oomycetes for microbial oils, which are cellulolytic fungus-like filamentous eukaryotic microorganisms, commonly known as water molds. They differ from true fungi as cellulose is present in their cell wall and chitin is absent. They show parasitic as well as saprophytic nature and have great potential to utilize decaying animal and plant debris in freshwater habitats. To study the triacylglycerol (TAG) accumulation in the aquatic oomycetes, the isolated water mold Achlya diffusa was cultivated under semi-solid-state conditions on waste sugarcane bagasse, which was compared with the cultivation in Czapek (DOX) medium. A. diffusa grown on waste sugarcane bagasse showed large lipid droplets in its cellular compartment and synthesized 124.03 ± 1.93 mg/gds cell dry weight with 50.26 ± 1.76% w/w lipid content. The cell dry weight and lipid content of this water mold decreased to 89.54 ± 1.21 mg/gds and 38.82% w/w, respectively, when cultivated on standard medium Czapek-Dox agar (CDA). For the fatty acid profile of A. diffusa grown in sugarcane bagasse and CDA, in situ transesterification (IST) and indirect transesterification (IDT) approaches were evaluated. The lipid profile of this mold revealed the presence of C12:0, C14:0, C16:0, C18:0, C18:1, C18:2, C20:0, and C21:0 fatty acids, which is similar to vegetable oils. The biodiesel properties of the lipids obtained from A. diffusa satisfied the limits as determined by international standards ASTM-D6751 and EN-14214 demonstrating its suitability as a fuel for diesel engines.