Phenol is reported to be one of the most toxic environmental pollutants present in the discharge of various industrial effluents causing a serious threat to the existing biome. Biodegradation of phenol by oleaginous yeast Rhodosporidium kratochvilovae HIMPA1 was found to degrade 1000mg/l phenol. The pathways for phenol degradation by both ortho and meta-cleavage were proposed by the identification of metabolites and enzymatic assays of ring cleavage enzymes in the cell extracts. Results suggest that this oleaginous yeast degrade phenol via meta-cleavage pathway and accumulates a high quantity of lipid content (64.92%; wt/wt) as compared to control glucose synthetic medium (GSM). Meta-cleavage pathway of phenol degradation leads to formation of pyruvate and acetaldehyde. Both these end products feed as precursors for de novo triacylglycerols (TAG) biosynthesis pathway which causes accumulation of TAG in the lipid droplets (LD) of 6.12±0.78μm grown on phenol while 2.38±0.52μm observed on GSM. This was confirmed by fluorescence microscopic images of BODIPY_505-515nm stained live yeast cells. GC-MS analysis of extracted total lipid showed enhanced amount of monounsaturated fatty acid (MUFA) which was as 51.87%, 58.33% and 62.98% in presence of 0.5, 0.75 and 1g/l of phenol.