Sri Lanka’s energy policy presumes that the country will be meeting 20% of its energy requirements by non-conventional renewable energy resources by 2020. This study attempts to assess diesel vehicle owners’ willingness to pay (WTP) for Jatropha biodiesel and the factors affecting their decisions. The Contingent valuation method (CVM) was used to elicit the WTP for the non-marketed biodiesel, which leads to a hypothetical allocation. For diesel vehicle users, a single bid approach was used at Rs.121/= per litre (€ 0.83). The study was carried out in Kandy region among diesel vehicle users. The factors affecting WTP were estimated using probit regression and WTP was estimated using nonparametric estimation techniques. The mean WTP for biodiesel by the diesel vehicle users was Rs.109 per litre (€ 0.74) for lower bound levels. The median WTP was Rs.124/= per litre (€ 0.85). Elderly respondents with higher education are less likely to pay for biodiesel in both samples. Married respondents with higher income are more likely to pay higher prices for biodiesel.