In the conventional transesterification of fats/vegetable oils for biodiesel production, free fatty acids and water always produce negative effects, since the presence of free fatty acids and water causes soap formation, consumes catalyst and reduces catalyst effectiveness, all of which result in a low conversion. The objective of this study was, therefore, to investigate the effect of water on the yield of methyl esters in transesterification of triglycerides and methyl esterification of fatty acids as treated by catalyst-free supercritical methanol. The presence of water did not have a significant effect on the yield, as complete conversions were always achieved regardless of the content of water. In fact, the present of water at a certain amount could enhance the methyl esters formation. For the vegetable oil containing water, three types of reaction took place; transesterification and hydrolysis of triglycerides and methyl esterification of fatty acids proceeded simultaneously during the treatment to produce a high yield. These results were compared with those of methyl esters prepared by acid- and alkaline-catalyzed methods. The finding demonstrated that, by a supercritical methanol approach, crude vegetable oil as well as its wastes could be readily used for biodiesel fuel production in a simple preparation.