BACKGROUND: Sal (Shorea robusta) deoiled seed cake extract (SDOCE) was assessed for its suitability as a cheap natural substrate for lipase production under submerged fermentation. The bacterial isolate Aeromonas sp. S1 isolated from dairy industry was used for lipase production. Both the isolate and its lipase were shown to be potential tools for treatment of dairy wastewater containing higher organic load. RESULTS: On substituting tributyrin with SDOCE, lipase production was enhanced 24-fold (195 U mL(-1)) compared with the initial 8.13 U mL(-1) lipase activity. Maximum lipase production was obtained at pH 8.0 and incubation temperature 30 degrees C. The lipase had pH and temperature optima of 10.0 and 55 degrees C, respectively. The isolate and its crude enzyme preparation were checked separately for applicability in dairy wastewater treatment. The isolate was able to reduce chemical oxygen demand (COD) by 93%, oil and grease (O&G) by 75%, and total suspended solids (TSS) by 47% after 96 h of treatment. Enzymatic preparation gave 86% reduction of COD after 12 h and 75 and 45% reduction of O&G and TSS, respectively, after 96 h of treatment. CONCLUSION: Overall, the study shows the usefulness of Sal seed deoiled cake, a cheap agro-industrial by-product for the production of lipase. The isolate and its lipase can also be used effectively for the treatment of dairy wastewater. (C) 2011 Society of Chemical Industry