We evaluated the effects of dietary supplementation of phytosterol on the growth, feed utilization, immunity, digestibility, wound healing ability and disease resistance of olive flounder Paralichthys olivaceus. We conducted two consecutive feeding trials at different growth stages of the fish: EXP-1 (68.9 g) and EXP-2 (16.5 g). The experimental diets were supplemented with graded levels of phytosterol (1% ecdysteroid extracted from Achyranthis radix) at 0, 0.025, 0.05, 0.1, 0.2 and 0.4% (designated as Con, PHY0.025, PHY0.05, PHY0.1, PHY0.2 and PHY0.4, respectively). Dietary phytosterol did not significantly affect growth and cholesterol concentration. Feed utilization was higher in fish fed phytosterol-supplemented diets than in fish fed the control diet. Dietary phytosterol increased innate immunity and digestibility of protein and dry matter. Wound healing ability was also increased by the phytosterol supplementation. The survival against Edwardsiella tarda challenge was higher in fish fed low-phytosterol diets than in fish fed the control diet. The optimum dietary level of phytosterol seems to be approximately 0.05%. The results in this study indicate that the phytosterol could be used as a functional supplement in diets to improve feed utilization, immunity, digestibility and wound healing ability of olive flounder.