We have constructed a Saccharomyces cerevisiae strain displaying an active lipase on the cell surface by cell surface engineering. The gene encoding Rhizopus oryzae lipase (ROL) was fused with the genes encoding the pre-alpha -factor leader sequence and the C-terminal half of alpha -agglutinin including the glycosylphosphatidylinositol-anchor attachment signal. The constructed gene was overexpressed under the control of the glyceraldehyde-3-phosphate dehydrogenase promoter. Linker peptides (spacers) consisting of the Gly/Ser repeat sequence were inserted at the C-terminal portion of ROL to enhance lipase activity by preserving the conformation of the active site near the C-terminal portion. Localization of the expressed ROL on the cell surface was confirmed by immunofluorescence microscopy. The ROL displayed on the yeast cell wall exhibited activity toward soluble 2,3-dimercaptopropan-1-ol tributyl ester (BALB) and insoluble triolein. The insertion of linker peptides effected the activity towards BALB, thereby demonstrating that the optimal length of linker peptides was present. The activity towards triolein was higher in lipases with longer linker peptides. ROL displayed on the cell wall exhibited a comparable and/or higher activity towards triolein than the secreted form of the enzyme. This is the first report of an active lipase displayed on the cell surface. Furthermore, insertion of a linker peptide of the appropriate length as a spacer may be an improved method to effectively display enzymes, especially those having the active region at the C-terminal portion, on the cell surface.