Taxol is a highly functionalized anticancer drug widely used in hospitals and clinics. The leaf spot fungus, Phyllosticta dioscoreae was isolated from diseased leaves of Hibiscus rosa-sinensis and screened for extracellular production of taxol in M1D (Modified liquid medium) and PDB (Potato dextrose broth) medium for the first time. The fungus was identified by its morphological and conidial features in the culture growth. The presence of taxol in the fungal culture filtrate was confirmed by different spectroscopic and chromatographic analyses. The amount of taxol produced was quantified by HPLC. The maximum amount of taxol produced was found to be $298{mu}g/L$ in M1D medium. Production rate was $5.96{ imes}10^3$ times faster than that found in culture broth of earlier reported fungus, Taxomyces andreanae. The extracted fungal taxol also showed strong cytotoxic activity in vitro in the cultures of human cancer cells tested by apoptotic assay. The results indicate that P. dioscoreae is an excellent source of taxol production, which suggests that the fungus has potential to undergo genetic engineering in order to improve its production level.