Methanol-tolerant lipase producing yeast was successfully isolated and selected thorough ecological screening using palm oil-rhodamine B agar as one step-approach. All 49 lipase-producing yeasts exhibited the ability to catalyze esterification reaction of oleic acid and methanol at 3 molar equivalents. However, only 16 isolates catalyzed transesterification reaction of refined palm oil and methanol. Rhodotorula mucilagenosa P11I89 isolated from oil contaminated soil showed the strongest hydrolytic lipase activity of 1.2 U/ml against palm oil. The production of oleic methyl ester and fatty acid methyl ester (FAME) of 64.123 and 51.260% was obtained from esterification and transesterificadon reaction catalyzed by whole cell of R. mucilagenosa P11I89 in the presence of methanol at 3 molar equivalents against the substrates, respectively. FAME content increased dramatically to 83.29% when 6 molar equivalents of methanol were added. Application of the methanol-tolerant-lipase producing yeast as a whole cell biocatalyst was effectively resolved major technical obstacles in term of enzyme stability and high cost of lipase, leading to the feasibility of green biodiesel industrialization. (c) 2010 Elsevier Inc. All rights reserved.