Eleven biosurfactant producing bacteria were isolated from different petroleum-contaminated soil and sludge samples. Among these 11 isolates, two were identified as promising, as they reduced the surface tension of culture medium to values below 27 mN m-1. Besides biosurfactant production property, they exhibited good flocculating activity. Microbacterium sp. was identified as a new addition to the list of biosurfactant and bioflocculant-producers. Optimization of various conditions for rhamnolipid production was carried out for one of the promising isolate, Pseudomonas aeruginosa BS-161R. Bioglycerol (2.5%), as a cheap renewable carbon source, attained better rhamnolipid yield, while sodium nitrate appeared to be the preferable nitrogen source. The optimum carbon to nitrogen (C/N) and carbon to iron (C/Fe) ratios achieved were 15 and 28,350, respectively, which favored rhamnolipid production. Physical parameters like pH, temperature, and agitation speed also affected the production of rhamnolipids. Results from shake flask optimization indicated that the concentration of bioglycerol, sodium nitrate, and iron were the most significant factors affecting rhamnolipid production, which was supported by the results of central composite rotatable design. After optimization of the culture conditions, the production of rhamnolipids increased by ninefold from 0.369 to 3.312 g L-1. (C) 2012 American Institute of Chemical Engineers Biotechnol. Prog., 2012