Production of ultra low sulfur diesel (ULSD) and biosurfactants, namely, 2-hydroxybiphenyl and different lipids has been studied. The substituted benzothiophenes (BTs) and dibenzothiophenes (DBTs) in hydrotreated diesel get converted to 2-hydroxy biphenyl, which is a potential bio-surfactant. Kinetics of biodesulfurization of deep desulfurized diesel using Rhodococcus sp. has been studied with special reference to removal of organo-sulfur compounds in diesel and production of 2-hydroxy biphenyl (2-HBP). The sulfur concentration of feed diesel is in the range of 200-540 mg/L. Aqueous phase to diesel ratios have been varied in the range of 9:1 to 1:9. The optimum ratio has been found to be 1: 4 based on both the ease of separation of aqueous phase from diesel and the value of specific microbial growth rate and the maximum conversion of sulfur of 95% has been achieved. The values of Monod kinetic parameters, mu(max), maximum specific growth rate and K-s, saturation constant of the microbial growth and yield coefficient of surfactant have been measured to be 0.13 h (1), 68 mg/L, and 18.5 mu mol/g dry cell weights respectively by conducting batch type experiments at the optimum ratio of oil to aqueous phase. A chemostat has been studied using initial concentration of organo-sulfur compounds in diesel as a parameter. The identification of 2-HBP in treated diesel has been made using HPLC and GC-MS. A mathematical model has been developed on the basis of kinetic parameters derived from the shake flask analysis. The model has been validated by the comparison with the experimental data. Lipid content has been determined. Effects of extent of bio-desulfurization on the reduction of surface tension of aqueous nutrient phase, diesel phase and emulsification index have been determined. (C) 2013 Elsevier Ltd. All rights reserved.