To produce a phenol resin having water dispersibility and to obtain a water-base coating composition excellent in the coating film performance, containing the phenol resin as a binder.

A phenol resin is modified with an unsaturated fatty acid which is maleinized by use of maleic acid anhydride, and the modified phenol resin can be dispersed in water by subjecting the acid anhydride group to a ring-opening process with water, alcohol, amine or the like and then to neutralization with a base. A water-base coating material using the aqueous dispersion of the modified phenol resin shows excellent coating film performance.