The effect of oxygen on lipase production by Rhizopus arrhizus was studied under two operating modes, controlled dissolved oxygen concentration (DO) and controlled aeration rate. Lipase production depended more extensively on oxygen than cell growth. The intrinsic factor determining cell growth and lipase production was oxygen transfer rate (OTR) rather than DO concentration. Improvements in OTR, either by aeration or agitation or perfluorocarbon (PFC) inclusion resulted in an increase in lipase production. The formation of lipase could be described by a mixed-growth associated model. The overall productivity for the lipase which depended more strongly on agitation than aeration could be related to the volumetric oxygen transfer coefficient, kLa. Addition of 10% (v/v) PFC to the fermentation medium also resulted in higher lipase production.