In our routine screening programme, using agar diffusion assay method, lipolytic activity was detected around a colony of a fungus. The fungus was isolated from a soil sample which was brought from a location near oil-mill. This lipolytic fungus was then identified to belong to Aspergillus flavus oryzae. A medium was then formulated and optimized which would not only support good growth but also would yield good extracellular lipolytic activity. It was observed that a conventional carbohydrate-protein containing medium supported good growth of the fungus but moderate lipase activity, whereas, a hydrocarbon containing medium, although supported relatively less growth, yielded much more lipase activity.