Aims: Cloning and expression of keratinase gene in Bacillus megaterium and optimization of fermentation conditions for the production of keratinase by recombinant strain. Methods and Results: The keratinase gene with and without leader sequence from the chromosomal DNA of Bacillus licheniformis MKU3 was amplified by PCR and cloned into pET30b and transferred into Escherichia coli BL21. The ker gene without leader sequence only expressed in E. coli and the recombinant strain produced an intracellular keratinase activity of 74.3 U ml(-1). The ker gene was further subcloned into E. coli-Bacillus shuttle vector, pWH1520. Bacillus megaterium ATCC 14945 carrying the recombinant plasmid pWHK3 expressed the ker gene placed under xylA promoter and produced an extracellular keratinase activity of 95 U ml(-1). Response surface methodology (RSM) was employed to optimize the fermentation condition and to improve the level of keratinase production by the recombinant strain. A maximum keratinolytic activity of 166.2 U ml(-1) (specific activity, 33.25 U mg(-1)) was obtained in 18 h of the fermentation carried out with an initial inoculum of 0.4 OD600 nm and xylose concentration of 0.75% w/v. Conclusions: Bacillus licheniformis keratinase was cloned and successfully expressed using T7 promoter in E. coli and xylose inducible expression system in B. megaterium. Response surface methodology was employed to optimize the process parameters, which resulted in a three-fold higher level of keratinase production by the recombinant B. megaterium (pWHK3) than the wild type strain B. licheniformis MKU3. Significance and Impact of the Study: This study suggests that B. megaterium is a suitable host for the expression of cloned genes from heterologous origin. Optimization of fermentation conditions improved the keratinase production by B. megaterium (pWHK3) and suggested that this recombinant strain could be used for the production of keratinase.