With increasing demand of energy, depletion of global fossil fuel reserves, and unsustainable emission rates of greenhouse gases, there is considerable impetus for the development of renewable fuel sources. Fatty acid derived biofuels, being energy-dense and compatible with existing infrastructure, represent a promising supplement to petroleum-based fuels. Earlier work has led to extensive genetic and biochemical characterization of the fatty acid biosynthesis pathway in Escherichia coli. More recently, the potential of using E. coli as a biocatalyst for converting biomass into fatty acid derivatives in an economically viable manner has been explored. In this article, we review the fatty acid biosynthesis pathway, and metabolic engineering efforts to manipulate the system for enhanced production of biodiesel, fatty alcohols, alkenes, and alkanes.