BACKGROUND The high cost of phytase production is the most limiting factor in its application in animal feeds. The present study aimed to develop a low-cost medium for production of a novel phytase in submerged fermentation using inexpensive agro-industrial by-products. The applicability of phytase in dephytinisation of commonly used food/feed ingredients, i.e. soybean meal and wheat bran, was also investigated. RESULTS Using a one-factor-at-a-time approach, soybean meal and cane molasses were identified as significant agro-industrial by-products and these factors were subsequently optimised using response surface methodology ( RSM). A central composite design was employed to further enhance phytase yield. Under optimum conditions of soybean meal 22.3 g L−1, cane molasses 100 g L−1 and 39 h fermentation, phytase production increased to 56.562 U mL−1, indicating more than 28-fold enhancement. The enzyme efficiently dephytinised wheat bran and soybean meal after 24 h incubation at 56.5 °C and increased inorganic phosphate content by 240% and 155%, respectively. CONCLUSION Soybean meal and cane molasses were successfully used for enhancement of phytase production as economical carbon, nitrogen and phytic acid sources using RSM. The phytase showed a good capability to dephytinise wheat bran and soybean meal, demonstrating that the enzyme can be considered as a potential candidate for industrial food and feed applications. © 2016 Society of Chemical Industry [ABSTRACT FROM AUTHOR]