A non-interpenetrating crosslinked poly(methyl methacrylate-ethylene glycol dimethacrylate) (PMMA-EGDM) clay composite membrane has been prepared by using dual initiating system. We have functionalized these membranes by technique reported in literature to chemically bind the lipase on it. These are then used in biphasic enzyme membrane reactor (EMR) for hydrolysis of olive oil and the effect of various operating conditions on reaction rate was examined. The performance of the biphasic EMR is evaluated in terms of the apparent volumetric reaction rate based on the volume of the aqueous phase used for the extraction of the fatty acids. The immobilized form of the enzyme in our reactor is found to be highly stable and has been used for more than 50 h of reaction over a period of 25 days with negligible change (similar to3%) in the activity. Experiment shows that the activity of lipase upon immobilization is found to increase by as much as 39%. (C) 2003 Elsevier B.V. All rights reserved.