The combustion of mobil oil leads to the emission of toxic compounds in the environment. In this study, the aromatic and aliphatic hydrocarbon fractions present in a waste mobil oil collected from automobile market were comprehensively identified and their toxicity was evaluated using wheat grain. Lysinibacillus sphaericus strain IITR51 isolated and characterized previously could degrade 30–80% of both aliphatic and aromatic hydrocarbons in liquid culture. Interestingly, the strain IITR51 produced 627 mg/L of rhamnolipid biosurfactant by utilizing 3% (v/v) of waste mobil oil in the presence of 1.5% glycerol as additional carbon source. In a soil microcosm study by employing strain IITR51, 50–86% of 3–6 ring aromatic hydrocarbons and 63–98% of aliphatic hydrocarbons (C8 to C22) were degraded. Addition of 60 μg/mL rhamnolipid biosurfactant enhanced the degradation of both aliphatic and aromatic hydrocarbons from 76.88% to 61.21%–94.11% and 78.27% respectively. The degradation of mobil oil components improved the soil physico-chemical properties and increased soil fertility to 64% as evident by the phytotoxicity assessments. The findings indicate that strain IITR51 with degradation capability coupled with biosurfactant production could be a candidate for restoring hydrocarbon contaminated soils.