Cell-bound lipase activity (10 pNPL units/g dry cell weight) was released when the yeast Rhodotorula glutinis was cultured in a 7-l stirred tank fermenter using palm-oil as the sole carbon source. The enzyme showed relative specificity towards medium chain organic acids since the apparent K-m values for pNPB (p-NitroPhenyl-Butyrate) and pNPL (p-NitroPhenyl-Laurate) mere equal to 2.7 and 0.7 mM, respectively. In addition, 80% of this activity could be detected on the surface of the cells. The cell-bound nature of the enzyme increased its thermal stability showing half-life times of 200 and 60 min at 50 and 60 degrees C, respectively, as well as good stability in organic solvents. Freeze-dried cell preparations were successfully used to catalyze the synthesis of fatty acid esters of butanol and heptanol in nearly anhydrous organic solvents. A conversion of 60-62% was obtained upon esterification of palmitic or oleic acid with butanol, within 96 h. The enzyme preparation was used in four consecutive batch reactions with only 10% loss of activity.