This paper describes the study of a continuous direct contact membrane reactor (CDCMR) for enzymatic catalysed oil hydrolysis. The reaction rate, kinetic stability, and product (fatty acids):yield of the CDCMR system are analysed and compared to a conventional stirred tank reactor to elucidate the potential advantages and optimal operating strategies of the combined reaction and separation process. The dynamism of the biphasic emulsion system and the constantly changing physicochemical properties of the organic-aqueous interface where the lipolytic reaction took place were studied for their effect on the overall system reaction rate and yield. The CDCMR performance was studied as a function of oil-water molar ratio, oil droplet size, interfacial tension, and feed stock flow rate. The effect of the presence of bovine serum albumin in the aqueous subphase for accelerated desorption of reaction product (fatty acids),:and the effect of simultaneous separation of glycerol are highlighted. This paper also proposes the application of a two-substrate reaction kinetic model with limited water accessibility to the active site of the enzyme molecules situated at the reaction interface. The validated model has been demonstrated and takes into account the complexity of the underlying reaction mechanism better than the theoretical hypotheses already existing in the research literature. (C) 2000 Elsevier Science B.V. All rights reserved.