A gene encoding a lipolytic enzyme amplified from the alkaliphilic bacterium Bacillus halodurans LBB2 was cloned into the pPICZ alpha B vector and integrated into the genome of the protease deficient yeast strain Pichia pastoris SMD1168H. This previously undescribed enzyme was produced in active form, and cloning in frame with the Saccharomyces cerevisiae secretion signal (alpha-factor) enabled extracellular accumulation of correctly processed enzyme, with an apparent molecular mass of 30 kDa. In shake-flask cultivations, very low production levels were obtained, but these were significantly improved by use of a "batch-induced" cultivation technique which allowed a maximum enzyme activity of 14,000 U/l using p-nitrophenyl butyrate (C-4) as a substrate and a final extracellular lipolytic enzyme concentration of approximately 0.2 g/l. Partial characterization of the produced enzyme (at pH 9) revealed a preference for the short-chain ester (C-4) and significant but lower activity towards medium (C5-C6) and long (C16 and C18) fatty acid chain-length esters. In addition, the enzyme exhibited true lipase activity (7,300 U/l) using olive oil as substrate and significant levels of phospholipase activity (6,400 U/l) by use of a phosphatidylcholine substrate, but no lysophospholipase activity was detected using a lysophosphatidylcholine substrate.