The council has ordered 26,000 litres of the new fuel, called Globaldiesel, which is produced by London-based company Greenergy.
The council's Fleet News Environmental Award-winning fleet manager Garry Middleton is aiming to have all 750 cars and vans on his fleet running on the newly-launched fuel by the end of the month.
He said: 'Biodiesel seems to be the next logical step for us, and we have been talking to Greenergy for the past six months.'
Companies are being encouraged to use biodiesel with a 20p per litre duty reduction compared to normal diesel.
GlobalDiesel is a blend of fuels, containing 5% renewable biodiesel made primarily from rapeseed oil, with some vegetable waste oils from the catering industry and 95% Ultra-low Sulphur Diesel.
Environment minister Michael Meacher said: 'Bio-fuels will not solve all our environmental problems, but they can offer a number of advantages over conventional petrol and diesel.
'We will be very interested to see how this fuel performs and how motorists respond to it.' The Government predicts the number of alternatively-fuelled vehicles on UK roads will double to 100,000 by 2004. Currently, the bulk of more than 50,000 clean fuel vehicles are powered by liquefied petroleum gas.
Cities are being encouraged to purchase clean fuel vehicles by the Alter Project, which claims to have developed proposed procurement projects for one million vehicles.
It is looking at adding a leasing firm to its steering committee to help build demand for vehicles and has had talks with Lex Vehicle Leasing and several other firms.