The encapsulation and interaction of xylanase I (Xyl I) from Thermomonospora sp. in thermally evaporated fatty amine films by a simple beaker-based immersion technique under enzyme-friendly conditions has been described. The approach is based on the diffusion of the enzyme from aqueous solution, driven primarily by attractive electrostatic interactions between charged groups on the enzyme surface and ionized lipid molecules in the film. The encapsulated Xyl I molecules initially failed to show catalytic activity possibly due to the interaction of residues in the enzyme active site with the matrix thereby causing its inactivation. It was found that encapsulating Xyl I into the lipid matrix along with its substrate (xylan) resulted in catalytic activity of the biocomposite film comparable to that of the free enzyme molecules in solution. The kinetics of Xyl I diffusion into the amine films was followed using quartz crystal microgravimetry, whereas Fourier transform infrared spectroscopy and biocatalytic activity measurements confirmed the stable native conformation of the encapsulated enzyme. The interaction of the lipid molecules with the active site of Xyl I was ascertained by fluorescent chemoaffinity labeling with o-phthalaldehyde. The encapsulated substrate-protected Xyl I system was reusable, and it was found that the lipid matrix stabilizes the enzyme and shifts the optimum temperature for catalytic activity from 80 to 85 degreesC. The present results describe a radically new approach for the entrapment of biocatalysts into thermally evaporated lipid films and for the understanding of protein-lipid interaction.