Residual oil from palm oil mill effluent (POME) can be valorized into value-added products like biofuel. However, the complex structure in POME limits the full recovery of intracellular lipids. To address this challenge, low-frequency ultrasonication was used as a pre-treatment prior to oil recovery to improve the yield by liberating the entrapped oil via the cell disruption technique. This study focused on optimizing the ultrasound conditions (i.e., ultrasonication amplitude, ultrasonication duration, and probe immersion depth) to maximize the improvement of oil recovery yield using response surface methodology. The optimized conditions were 30.074% ultrasonication amplitude, 0.167 min ultrasonication duration, and 2 cm probe immersion depth. This resulted in an additional 42.50% improvement in oil recovery yield over non-ultrasonicated POME, which is in close agreement with the model prediction. Additionally, a cost-benefit analysis was incorporated to determine the feasibility of ultrasonication for enhancing oil recovery. The study also explored the synthesis of biodiesel from POME-recovered oil and characterized the fuel attributes according to American Society for Testing and Materials- and European Standards-prescribed procedures. The attributes of biodiesel produced from POME-recovered oil are comparable to those of palm-based biodiesel in Malaysia, demonstrating its potential as an alternative source for biodiesel production.