Whereas in the familiar Kondo effect the exchange interaction is dipolar, there are systems in which the exchange interaction is multipolar, as has been realized in a recent experiment. Here, we study multipolar Kondo effect in a Fermi gas of cold Yb173 atoms. Making use of different ac polarizabilities of the electronic ground state Yb(S01) and the long-lived metastable state Yb∗(P23), it is suggested that the latter atoms can be localized and serve as a dilute concentration of magnetic impurities while the former ones remain itinerant. The exchange mechanism between the itinerant Yb and the localized Yb∗ atoms is analyzed and shown to be antiferromagnetic. The quadrupole and octupole interactions act to enhance the Kondo temperature TK that is found to be experimentally accessible. The bare exchange Hamiltonian needs to be decomposed into dipole (d), quadrupole (q), and octupole (o) interactions in order to retain its form under renormalization group (RG) analysis, in which the corresponding exchange constants (λd,λq, and λo) flow independently. Numerical solution of the RG scaling equations reveals a few finite fixed points. Arguments are presented that the Fermi-liquid fixed point at low temperature is unstable, indicating that the impurity is overscreened, which suggests a non-Fermi-liquid phase. The impurity contributions to the specific heat, entropy, and the magnetic susceptibility are calculated in the weak coupling regime (T TK), and are compared with the analogous results obtained for the standard case of dipolar exchange interaction (the s-d Hamiltonian).