Dandruff and seborrheic dermatitis (D/SD) are common hyperproliferative scalp disorders with a similar etiology. Both result, in part, from metabolic activity of Malassezia globosa and Malassezia restricta, commensal basidiomycete yeasts commonly found on human scalps. Current hypotheses about the mechanism of D/SD include Malassezia-induced fatty acid metabolism, particularly lipase-mediated breakdown of sebaceous lipids and release of irritating free fatty acids. We report that lipase activity was detected in four species of Malassezia, including M. globosa. We isolated lipase activity by washing M. globosa cells. The isolated lipase was active against diolein, but not triolein. In contrast, intact cells showed lipase activity against both substrates, suggesting the presence of at least another lipase. The diglyceride-hydrolyzing lipase was purified from the extract, and much of its sequence was determined by peptide sequencing. The corresponding lipase gene (LIP1) was cloned and sequenced. Confirmation that LIP1 encoded a functional lipase was obtained using a covalent lipase inhibitor. LIP1 was differentially expressed in vitro. Expression was detected on three out of five human scalps, as indicated by reverse transcription-PCR. This is the first step in a molecular description of lipid metabolism on the scalp, ultimately leading toward a test of its role in D/SD etiology.