There has been increased interest surrounding the use of tea tree oil (TTO) as a natural antimicrobial. In this study, the antimicrobial activity of TTO and its components were investigated in vitro and in a predominantly lipid-based personal care formulation. In vitro, TTO showed minimal inhibitory concentrations of 0.2% (for Saccharomyces cerevisiae and Pythium sulcatum), 0.4% (for Escherichia coli, Bacillus subtilis, and Rhizopus stolonifer), and 0.8% (for Botrytis cinerea). TTO at 0.08%-0.8% was often as efficient as parabens. Comparison of the antimicrobial activities of TTO components showed that terpinen-4-ol and γ-terpinene were generally most effective in inhibiting microbial growth. TTO activity in a personal care product was evaluated through air and water exposure, artificial inoculation, and shelf life studies. While TTO did not increase shelf life of unopened products, it decreased microbial load in products exposed to water and air. Results from this study support that antimicrobial activity of TTO can be attributed to varying levels of its components and that low levels of TTO were effective in reducing microbial growth during the use of the product. This study showed that TTO can act as a suitable preservative system within an oil-based formulation.