Phytonutrients retained palm olein (PRPOL) was prepared and blended into butterfat at different ratios. The physicochemical characteristics and the phytonutrient composition of blends, as well as its utilization in the preparation of functional chocolate spread were evaluated. The results showed that the redness, yellowness, slip melting point, free fatty acids, peroxide value, iodine value, unsaponifiable matter, diacylglycerol and monoacylglycerol increased while lightness, saponification value, and triacylglycerol significantly decreased upon incorporation of increased quantities of PRPOL into butterfat. The incorporation affected short chain, medium chain and long chain fatty acids content along with variation in the palmitic, stearic, oleic acids content of the blends as compared to butterfat alone. Improvement in carotenoids (6-27 fold), phytotosterols (3-15 fold), tocopherols and tocotrienols (4-17 fold), and squalene (1-6 fold) in blends was observed upon incorporation of PRPOL. Cholesterol level in the blends was reduced (10-50 %) as compared to the butterfat. The blends showed an intermediate solid fat content of PRPOL and butterfat. Moreover, radical scavenging activity of the blends increased with increase in PRPOL quantity. Prepared chocolate spreads showed similar fat, moisture, colour components (L*, a* and b*) and better emulsion stability. The hardness of the spreads was increased upon increasing quantity of PRPOL. The sensory evaluation showed that chocolate prepared by replacing butterfat with 20 % PRPOL had acceptable sensory attributes.