The synthesis of terpene esters was studied using a Candida rugosa lipase encapsulated in ail AOT-revevse-micellar solution. Three terpene alcohols, geraniol, citronellol, and menthol and three triacylglycerols, tributyrin, tricaprylin, and triacetin were investigated as substrates for the transesterification. Geraniol and tributyrin were found to be the best substrates to form the terpene eater in a water/AOT/isooctane reverse micellar solution. To obtain higher conversion yields of geraniol, the reaction parameters such as solvent type : enzyme and surfactant concentration, pH, W-o, and substrate concentration and ratio were investigated It was concluded that enzyme deactivation in the reverse micelle was the main factor leading to suboptimal conversions. For a geraniol concentration of 100 mw, the highest extent of conversion of geraniol in a 500 mM AOT-reverse-micellar solution at pH 7 and W-o = 11 at 30 degrees C was about 70%; however the stability of the entrapped lipase under these conditions was low; the activity level for the C. rugosa lipase entrapped in reverse micelles dropped precipitously to about 10% within 24 h.