An examination has been made of the changes in bacterial and fungal populations during the decomposition of oil in contaminated soil. The number of aerobic and anaerobic bacteria and the length of mycelium increased in the oily soil whereas the number of CFU (= colony forming units) of fungi was highest in a control soil. The percentage of oil‐utilizing fungi increased from 60% to 82%, while the bacterial utilization figure increased from 3% to 50%. The important oil‐utilizing fungus Scolecobasidium appeared only in the oily soil, but otherwise the composition of the fungal flora changed only little after addition of oil. In laboratory experiments the chemical Pajab FI was shown to increase microbial activity.