While international debate continues regarding the development of primary biofuels, second-generation biofuels derived from agricultural waste have emerged as an environmentally sound alternative for policymakers and entrepreneurs interested in biofuel development, including in the ESCWA region. Advocates indicate that developments in this sector can also help to address the environmental problems of the region, as well as to create new employment and income opportunities through the introduction of environmentally sound technologies. This study examines the opportunities and constraints associated with the development of second-generation biofuels in the region, based on a review of existing environmentally sound technologies that can be accessed by small and medium-sized enterprises. The study presents country case studies based on financial and environmental assessments and analyses agricultural waste generated by three sectors important to the region, namely the olive oil, sugar (from sugar cane and sugar beet) and dairy industries. It also offers a series of recommendations aimed at assisting decision makers and entrepreneurs in pursuing the development of second-generation biofuels using environmentally sound technologies.