A low-cost single-stage laboratory process combining fungal dehydration and lipid extraction was compared with a traditional two-stage method employing freeze-drying and subsequent mechanical disruption in the presence of solvent. The ability of a number of organic solvents to form hetero-azeotropes with water was exploited. Chloroform, cyclohexane and hexane were assessed in their abilities to both dry and extract lipid from the oleaginous phycomycete Mortierella alpina (ATCC 32222). Drying rate and Lipid extraction were maximised under conditions that prevented fungal agglomeration. The total processing time was limited by the rate of dehydration rather than by the rate of lipid extraction. In all cases azeotropic distillation facilitated a greater rate of dehydration than was possible with freeze-drying. A consequent reduction in overall processing time was observed. Uniquely, both the solvent used and the mode of mixing employed controlled the morphology of the aggregates formed during distillation. In combination with mild mixing chloroform discouraged agglomeration whereas cyclohexane and hexane promoted aggregation. Successful lipid extraction was dependent on the use of dry biomass rather than on the application of heat to effect distillation. Neither the application of heat nor the solvent employed had any significant effect on the lipid composition of the extracted oil.