Biodiesel, an alternative fuel, is generated via the transesterification reaction of vegetable oil or animal oil with alcohol. Currently, many reports have noted that microbial lipases might be utilized for the production of biodiesel. Among them, immobilized Candida antarctica lipase B (Novozym435) is frequently utilized for its biocatalytic efficiency and availability. However, as the enzyme is unstable in a medium containing high concentrations of methanol, a multi-stepwise methanol supply is required for the efficient production of biodiesel. Photobacterium lipolyticum lipase (M37) was determined to be quite stable in a medium containing a high concentration of methanol. The enzyme activity was maintained for longer than 48 h without any loss at a methanol concentration of 10%. In an effort to evaluate enzyme performance in the production of biodiesel, we have compared M37 lipase and Novozym435 in the biodiesel production reaction using fresh or waste oil and methanol. In the 3-stepwise methanol feeding method generally conducted for Novozym435 in biodiesel production, the M37 lipase showed a similar or superior conversion yield to Novozym435. However, the M37 lipase evidenced significantly higher conversion yields in the 2 and 1 step methanol feeding reactions. Particularly in the 1 step process using 10% of methanol where almost no conversion was detected by Novozym435, the biodiesel yield achieved with M37 lipase reached a level of up to 70% of the possible maximum yield. Consequently, this methanol-tolerant lipase, M37, has been shown to be a suitable enzyme for use in the biodiesel production process. (C) 2009, The Society for Biotechnology, Japan. All rights reserved.