Abstract The possible application of a bacterial strain - Bacillus subtilis R1, isolated from an oil contaminated desert site in India, as biocontrol agent and its biosurfactant in microbial enhanced oil recovery are discussed. The biosurfactant production in minimal medium was carried out at different temperatures and salt concentrations, where it produced an efficient biosurfactant at 30-45 °C and in presence of up to 7% salt. It significantly reduced the surface tension from 66 ± 1.25 mN/m to 29 ± 0.85 mN/m within 24 h. In order to enhance the biosurfactant production, random mutagenesis of B. subtilis R1 was performed using chemical mutagen - ethyl methanesulfonate. Majority of the isolated 42 mutants showed biosurfactant production, but the difference was statistically insignificant as compared with parent strain R1. Therefore none of the mutants were selected for further study, and only parent strain R1 was studied. The biosurfactant was quite stable under harsh conditions for up to 10 days. The biosurfactant was extracted and characterized as similar to the lipopeptide group - surfactins and fengycin. The crude oil displacement experiments using biosurfactant broth in sand pack glass columns showed 33 ± 1.25% additional oil recovery. The strain also showed inhibition of various plant pathogenic fungi on potato dextrose agar medium.