Lipstatin, natural inhibitor of pancreatic lipase produced by Streptomyces toxytricini and used as an anti-obesity drug. Chemical mutagenesis was performed with different concentrations of N-methyl-N'-nitro-N-nitrosoguanidine (NTG) for strain improvement to obtain high yield of lipstatin. It was observed that the potential of the wild type strain to produce lipstatin (1.09 g/L) was very low. Selected mutants produced lipstatin in the range of 1.20-2.23 g/L at the flask level where maximum amount of lipstatin was produced by M5 mutant. For comparative study, both the parent and M5 mutant strain of S. toxytricini were grown at the lab scale bioreactor with suitable sources of carbon and nitrogen. Significant increase in the production of lipstatin was observed at the bioreactor level where the wild type strain produced 2.4 g/L of lipstatin, while through the NTG mutation, the production of lipstatin was 5.35 g/L. However, Dry Cell Weight (DCW) of the mutant strain was less in comparison with wild type strain and significant morphological differences were observed. Nearly 5 times increase in the production of lipstatin was achieved through NTG mutation and bioreactor-controlled conditions. It was determined that the NTG treatment might be beneficial for strain improvement to get a better candidate for lipstatin production on commercial scale.