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Background Increased iron uptake via siderophores triggers a series of physiological processes and generation of reactive oxygen species (ROS) which causes damage to proteins, lipids, carbohydrates, resulting into micro algal cell lysis. Moreover, there are reports mentioning oxidative stress is a mediator for increased lipid accumulation in microalgae. The main aim of this study is co-cultivation of the bacteria Acinetobacter soli (MTCC- 5918) and the microalgae Chlorella variabilis (ATCC-PTA 12198) under iron limiting conditions and the threshold value of iron that trigger oxidizing stress to microalgae. Further, the ROS generation in the microalgae C. variabilis was determined in terms of OH, SO2 and H2O2 concentration in the cells while co-cultivation. Results The co-cultured biomass contains (45.92 ± 0.74%) lipid content which was about 21% higher than that of the axenically grown microalgae. Carbohydrate content also increased to 40% than that of the control culture. Oxidative stress is a mediator for increased lipid accumulation in microalgae. As growth inhibition triggered due to the generation of high ROS toxicity during iron deficiency an increase in concentration of OH and H2O2 content was observed. In iron sufficient medium ash content of co-cultivated microalgae showed 32% and in iron deficient medium showed 14.23% which shows 44% decrease of ash content. Our novel approach significantly outperforms the involvement of different reactive oxygen species (ROS) in induction and in regulation of chelator release from cells at adequate Fe supply, which is also affecting the growth,lipids, carbohydrates, proteins, pigments, etc. Conclusions The findings of the present study highlights that oxidative stress is a mediator for increased lipid accumulation in microalgae that simultaneously becomes an alternative strategy for the improvement of biofuel potential in C. variabilis. The study portraysthe significance of co-cultivation of A. soli and C. variabilis induced oxidative stress (ROS generation) in microalgae caused due to higher uptake of iron via siderophore