In the present study, a yeast species isolated from CETP, Vellore, Tamilnadu was identified asCryptococcus sp. VITGBN2 based on molecular techniques and was found to be a potentproducer of acidic diacetate sophorolipid in mineral salt media containing vegetable oil asadditional carbon source. The chemical structure of the purified biosurfactant was identifiedas acidic diacetate sophorolipid through GC-MS analysis. This sophorolipid was used as astabilizer for synthesis of zinc oxide nanoparticles (ZON). The formation of biofunctionalizedZON was characterized using UV–visible spectroscopy, XRD, scanning electron microscopy(SEM), and Fourier transform infrared spectroscopy. The antimicrobial activities of nakedZON and sophorolipid functionalized ZON were tested based on the diameter of inhibitionzone in agar well diffusion assay, microbial growth rate determination, protein leakageanalysis, and lactate dehydrogenase assay. Bacterial pathogen Salmonella enterica and fungalpathogen Candida albicans showed more sensitivity to sophorolipid biofunctionalized ZONcompared with naked ZON. Among the two pathogens, S. enterica showed higher sensitivitytowards sophorolipid biofunctionalized ZON. SEM analysis showed that cell damageoccurred through cell elongation in the case of S. enterica, whereas cell rupture was found tooccur predominantly in the case of C. albicans. This is the first report on the dual role of yeastmediatedsophorolipid used as a biostabilizer for ZON synthesis as well as a novelfunctionalizing agent showing antimicrobial property.