Hydrolysis of palm oil by lipase enzyme in aqueous phase was studied in a well stirred bioreactor under defined mixing conditions. Agitation speed, concentration of the surfactant, palm oil, and the enzyme were varied to study their effect on the initial rate of hydrolysis. Addition of surfactant, gum arabic, increased the rate of hydrolysis and its optimum amount was found to be 25 mg l(-1). The optimum enzyme loading was found to be 92.5 kLU l(-1). Studies on the effect of agitation speed and substrate concentration showed that the initial rate of hydrolysis is dependent on the interfacial area between the oil phase and the aqueous phase containing the enzyme. No substrate inhibition was observed in the range of palm oil concentration 0-262 g l(-1) used in this study. (C) 2002 Elsevier Science Ltd. All rights reserved.