Biocatalytic synthesis is a promising environmentally friendly process for the production of biodiesel, a sustainable alternative fuel from renewable plant resources. In order to develop an economical heterogeneous biocatalyst, protein-coated microcrystals (PCMCs) were prepared from a commercial enzyme preparation from a recombinant Aspergillus strain expressing Thermomyces lanuginosus lipase and used for synthesis of biodiesel from palm olein by ethanolysis. Reaction parameters, including catalyst loading, temperature, and oil/alcohol molar ratio have been systematically optimized. Addition of tert-butanol was found to markedly increase the biocatalyst activity and stability resulting in improved product yield. Optimized reactions (20%, w/w PCMC-lipase to triacylglycerol and 1:4 fatty acid equivalence/ethanol molar ratio) led to the production of alkyl esters from palm olein at 89.9% yield on molar basis after incubation at 45 degrees C for 24 h in the presence of tert-butanol at a 1:1 molar ratio to triacylglycerol. Crude palm oil and palm fatty acid distillate were also efficiently converted to biodiesel with 82.1 and 75.5% yield, respectively, with continual dehydration by molecular sieving. Operational stability of PCMC-lipase could be improved by treatment with tert-butanol allowing recycling of the biocatalyst for at least 8 consecutive batches with only slight reduction in activity. This work thus shows a promising approach for biodiesel synthesis with microcrystalline lipase which could be further developed for cost-efficient industrial production of biodiesel. (C) 2010 Elsevier Ltd. All rights reserved.