The activity of Chromobacterium viscosum lipase (glycerol-ester hydrolase, EC 3.1.1.3) entrapped in AOT/isooctane and AOT/Tween 85/isooctane reverse micelles was significantly increased by the addition of short chain methoxypolyethylene glycols (MPEGs), taking the hydrolysis of olive oil as a model reaction. The molecular weight of MPEG had a strong effect on the lipase activity, and MPEG of nominal molecular weight 550 was found to be the most effective. To optimize the factors affecting enzymatic hydrolysis of olive oil in reverse micellar systems containing MPEG 550, the effect of various parameters, such as W-o (molar ratio of water to surfactant), pH, ionic strength, surfactant concentration and temperature were investigated. A kinetic model considering the substrate adsorption equilibrium between the bulk phase of organic solvent and the micellar phase was also successfully used to understand the enzyme activity in the presence of MPEG 550. Both the Michaelis constant and the substrate adsorption equilibrium constant were obviously reduced as compared with those obtained in the simple AOT reverse micellar system.