This study attempted to enhance biomass and lipid productivity of an oleaginous yeast Trichosporonoides spathulata by co-culturing with microalgae Chlorella spp., optimizing culture conditions, and encapsulating them in alginate gel beads. The co-culture of the yeast with microalgae Chlorella vulgaris var. vulgaris TISTR 8261 most enhanced overall biomass and lipid productivity by 1.6-fold of the yeast pure culture at 48 h and by 1.1-fold at 72 h. After optimization and scale-up in a bioreactor, this co-culture produced the highest biomass of 12.2 g/L with a high lipid content of 47 %. The dissolved oxygen monitoring system in the bioreactor showed that the microalgae worked well as an oxygen supplier to the yeast. This study also showed that the co-encapsulated yeast and microalgae could grow and produce lipid as same as their free cells did. Therefore, it is possible to apply this encapsulation technique for lipid production and simplification of downstream harvesting process. This co-culture system also produced the lipid with high content of saturated fatty acids, indicating its potential use as biodiesel feedstock with high oxidative stability.