The hydrolysis of olive oil catalyzed by Candida rugosa lipase solubilized in "H2O/AOT/isooctane" reverse micellar solution has been studied. The optimal conditions observed for lipase in reverse micelles were t = 25 degrees C, pH = 7.9, and R = [H2O]/[AOT] = 10. Lipase in reverse micelles is found to be quite stable. For example, after being incubated at 33 degrees C for 12 hours in AOT/isooctane with R = 5.4, the residual activity of lipase remains as high as 89%. No inhibition was observed even though the substrate concentration was increased up to 50% (v/v), and it was inhibited slightly when 40 mM Cu2+, Co2+ or Mn2+ ions were in the water pools.