It has contributed more than £1m in industrial assistance funds to the £15m project.
The plant at Newarthill in Lanarkshire will convert used cooking oil and animal fats into usable fuel.
When it begins operating next year, the facility's 50m litre output will supply 5% of Scotland's requirement for diesel.
The project's backer, Argent International, has drawn up plans to construct the biodiesel facility beside an existing animal rendering plant.
Enterprise Minister Jim Wallace has claimed that Scotland has the potential to become a world leader in the new "green economy" of the future.
He said: "This project is the type of development our economic strategy is designed to bring about.
"A dynamic business with new high value jobs, cutting edge technology, and ambitions to become a leader in its field."
As well as the funding from the executive, the project has been allocated £2m in a European funding grant for biodiesel research and development.
Andy Hunter, director of Argent Energy, said: "We are delighted that work has finally begun on the first biodiesel plant in Scotland and possibly the largest facility of its kind anywhere in the world."