Chemical dispersant application is one of the universally accepted oil spill response options. However, some concerns regarding the toxicity of chemical dispersants have been raised. The toxicity of the chemical dispersant can be reduced by using environmentally benign and biodegradable surfactants and water in their formulation. In this work, we have examined the ability of dispersants formulated with hydroxylated soybean lecithin solubilized in water to disperse crude oil. Soybean lecithin was fractionated and deoiled. The deoiled soybean lecithin was hydroxylated and solubilized in water to form the dispersant. The oil-in-water emulsion formed with the hydroxylated soybean lecithin dispersant was stable over a longer period of time and had smaller and more regular shaped oil droplets than the unhydroxylated soybean lecithin. The interfacial activity of the formulated dispersants was also examined. Generally, the interfacial activity of the soybean lecithin was improved through hydroxylation. Using the U.S. EPA's baffled flask test, the hydroxylated soybean lecithin resulted in a near complete dispersion effectiveness. The improved interfacial activity of the hydroxylated soybean lecithin over the unhydroxylated counterpart was attributed to the additional hydroxyl groups from the hydroxylation process (i) reducing the rigidity of the fatty acid chain, (ii) increasing interaction between the surfactant and aqueous film at the interface, and (iii) increasing the hydrophilicity of soybean lecithin. The finding from this study suggests that a dispersant formulated from hydroxylated soybean lecithin has the potential of replacing the traditional chemical dispersants in oil spill remediation.