In order to lower the production cost, waste frying oils were used in the biosynthesis of demulsifier by Dietzia sp. S-JS-1, which was isolated from petroleum contaminated soil. After 7 days of cultivation, the biomass concentration of the most suitable waste frying oil (WFO II) culture reached 3.78 g/L, which was 2.4 times the concentration of paraffin culture. The biodemulsifier produced with WFO II culture broke the emulsions more efficiently than that produced with paraffin culture, given the same volume ratio of carbon source in the culture medium and the same cultivation conditions. It achieved 88.3% of oil separation ratio in W/O emulsion and 76.4% of water separation ratio in O/W emulsion within 5 h. With the aid of thin layer chromatography (TLC) and Fourier transform infrared (FTIR) spectrometry, biodemulsifiers produced from both paraffin and WFO II were identified as a mixture of lipopeptide homologues. The subtle variation in the distribution of these homologues and high biomass concentration of WFO II cultures may account for the afore-mentioned good demulsification performance.