Staphylococcus sp. WL1 lipase (LipFWS) was investigated for methanolysis of crude palm oil (CPO) at moderate temperatures. Experiments were conducted in the following order: searching for the suitable bacterium for producing lipase from activated sludge, sequencing lipase gene, identifying lipase activity, then synthesising CPO biodiesel using the enzyme. From bacterial screening, one isolated specimen which consistently showed the highest extracellular lipase activity was identified as Staphylococcus sp. WL1 possessing lipFWS (lipase gene of 2,244 bp). The LipFWS deduced was a protein of 747 amino acid residues containing an alpha/beta hydrolase core domain with predicted triad catalytic residues to be Ser474, His704 and Asp665. Optimal conditions for the LipFWS activity were found to be at 55 degrees C and pH 7.0 (in phosphate buffer but not in Tris buffer). The lipase had a K-M of 0.75 mM and a V-max of 0.33 mM min(-1) on p-nitrophenyl palmitate substrate. The lyophilised crude LipFWS performed as good as the commonly used catalyst potassium hydroxide for methanolysis of CPO. ESI-IT-MS spectra indicated that the CPO was converted into biodiesel, suggesting that free LipFWS is a worthy alternative for CPO biodiesel synthesis.