Lipids of microbial origin have gained much attention due to its wide applicability and high productivity. Widely studied microbial lipids are those coming from single cell oils such as microalgae, yeast and activated sludge. Many researches have focused on enhancing lipid accumulation as well as biomass productivity with hope to utilize the accumulated lipids as an alternative source for biodiesel production. Unfortunately, these biological lipids have often been under utilized due to inefficient extraction technologies. In addition, in order to maximize lipid extraction toxic solvents such as chloroform are often employed. In this study, subcritical water (SCW) was employed for the treatment of activated sludge samples from various sources to enhance their extractable intracellular lipids. Optimum temperature and time for SCW treatment of wet activated sludge was found to be 175 °C and 15 min, respectively. After SCW treatment, a 2 to 4 folds increase in the extractable neutral lipid was observed without the need of using toxic solvent such as chloroform and cyclohexane. An investigation on the possible mechanism on how SCW treatment was able to improve lipid extractability was also carried out in this study.