India has a large diversity of traditional agro-forestry systems, aimed at multiple benefits. The focus of these traditional agro-forestry systems are crop production and trees which are grown in rows along with crops or along boundary or bunds. Biofuel crops can also be incorporated into traditional agro forestry systems, without affecting the production of food crops. In some situations, biofuel crops such as Pongamia pinnata grown on bunds could enhance crop production. Tree borne oil seed based agroforestry system is an alternative model available for the rehabilitation and utilisation of the vast expanse of wastelands and degraded land in the country. Another matter of great concern is meeting the energy needs of the rapidly-growing economy of the country. In this situation Biodiesel has emerged as one of the promising options. Hence production of raw materials for biodiesel such as oilseeds, is now gaining importance. So, the use of wastelands to produce tree-borne oilseeds can realise the twin objectives of rehabilitation of a vital land resource and obtaining an energy substitute. Although there are definite advantages in this approach, achieving the desired outcome is not easy. The major constraint is the lack of accurate information about the cultivation practices of the species, their potential yields and income. Though there are several trees yielding oilseeds, Jatropha curcus, Pongamia pinnata, Madhuca indica and Azadirachta indica are the species of high potential. The systematic approach backed by scientifically validated information is necessary in the promotion of these species. Therefore, in order to use agro-forestry systems for biofuel production and sustainable development in India. The research, policy and cultivation practice will have to focus on improving the traditional and modern agro-forestry systems, enhancing the size and diversity of agro-forestry systems by selectively growing trees by designing context specific multipurpose agro forestry systems for biofuel production.