The surfactant-coated Candida rugosa lipase was used as catalyst for hydrolysis of olive oil in two-phase system consisting of olive oil and phosphate buffer without organic solvent. For both the coated and native lipases, the optimal buffer/oil volume ratio of 1.0, aqueous pH 6.8 and reaction temperature 30degreesC were determined. The maximum activity of the coated lipase was ca 1.3 times than that of the native lipase. The half-life of the coated lipase in olive oil and the native lipase in phosphate buffer was ca 9 h and 12 h, and the final residual activity was 27% and 20% of their initial values, respectively. The final substrate conversion by the coated lipase was ca 20% higher than that of the native lipase.