In the present study, 40 pigment-producing microbes were isolated from various soil sources. Among these, a novel water-soluble yellow pigment-producing fungal isolate (MBYP1) was identified as Aspergillus sp. through ITS gene sequencing. The maximum pigment yield (UA430nm, 12.45 ± 0.5g/l) was obtained when strain MBYP1 was cultured under optimum conditions (28°C and pH 5.5 under static condition). Subsequently, the pigment was purified through gel chromatography and high-performance liquid chromatography (HPLC). Characterization of purified pigment through UV-Vis and liquid chromatography-mass spectrometry (LC-MS) reveal maximum absorbance at 430nm and molecular mass of 301m/z, respectively. Further, the pigment exhibited a maximum dyeing capacity of up to 80% irrespective of mordant. Toxicity evaluation of purified pigment with zebra fish model system reported an IC50 value of 710µg/mL. Pigment antioxidant ability was established by DPPH (35.7µg/mL) and phosphomolybdenum assay (226.61mg/g) thus ascertaining improvised light fastness of dyed fabric. Moreover, lack of antimicrobial activity (up to 40µg/mL) improves pigment bio-degradability. In collective, the novel yellow pigment from Aspergillus sp. MBYP1 strain was found to be an eco-friendly alternative to synthetic dye for potential applications in textile industries.