A bacterial strain isolated from spoiled coconut and identified as Bacillus cereus was found capable of producing alkaline thermostable extracellular lipase. Optimum temperature, time, and pH for enzyme substrate reaction were found to be 60 A degrees C, 10 min, and 8.0 respectively. Common surfactants except Triton X 100 and cetyltrimethylammonium bromide have no or very little inhibitory effects on enzyme activity. The enzyme was found to be stable in presence of oxidizing agents and protease enzyme. The maximum lipase production was achieved at 30-33 A degrees C, pH 8.0 on 24 h of fermentation using 50 ml medium in a 250-ml Erlenmeyer flask. The superior carbon and nitrogen sources for lipase production were starch (2%) and ammonium sulfate (nitrogen level 21.2 mg/100 ml), peptone (nitrogen level 297 mg/100 ml), and urea (nitrogen level 46.62 mg/100 ml) in combination, respectively. The maximum enzyme activity obtained was 33 A +/- 0.567 IU/ml.