We report a novel approach for enhanced accumulation of fatty acids and triacylglycerols for utilization as biodiesel in transgenic tobacco stems through xylem-specific expression of Arabidopsis DGAT1 and LEC2 genes. The use of plant biomass for production of bioethanol and biodiesel has an enormous potential to revolutionize the global bioenergy outlook. Several studies have recently been initiated to genetically engineer oil production in seeds of crop plants to improve biodiesel production. However, the "food versus fuel" issues have also sparked some studies for enhanced accumulation of oils in vegetative tissues like leaves. But in the case of bioenergy crops, use of woody stems is more practical than leaves. Here, we report the enhanced accumulation of fatty acids (FAs) and triacylglycerols (TAGs) in stems of transgenic tobacco plants expressing Arabidopsis diacylglycerol acyltransferase 1 (DGAT1) and leafy cotyledon2 (LEC2) genes under a developing xylem-specific cellulose synthase promoter from aspen trees. The transgenic tobacco plants accumulated significantly higher amounts of FAs in their stems. On an average, DGAT1 and LEC2 overexpression showed a 63 and 80% increase in total FA production in mature stems of transgenic plants over that of controls, respectively. In addition, selected DGAT1 and LEC2 overexpression lines showed enhanced levels of TAGs in stems with higher accumulation of 16:0, 18:2 and 18:3 TAGs. In LEC2 lines, the relative mRNA levels of the downstream genes encoding plastidic proteins involved in FA synthesis and accumulation were also elevated. Thus, here, we provide a proof of concept for our approach of enhancing total energy yield per plant through accumulation of higher levels of FAs in transgenic stems for biodiesel production.