Biodiesels are mostly produced from lipid transesterification of vegetable oils, including those from soybean, jatropha, palm, rapeseed, sunflower, and others. Unfortunately, transesterification of oil produces various unwanted side products, including steryl glucosides (SG), which precipitate and need to be removed to avoid clogging of filters and engine failures. So far, efficient and cost-effective methods to remove SGs from biodiesel are not available. Here we describe for the first time the identification, characterization and heterologous production of an enzyme capable of hydrolyzing SGs. A synthetic codon-optimized version of the lacS gene from Sulfolobus solfataricus was efficiently expressed and purified from Escherichia coli, and used to treat soybean derived biodiesel containing 100 ppm of SGs. After optimizing different variables, we found that at pH 5.5 and 87 °C, and in the presence of 0.9 % of the emulsifier polyglycerol polyricinoleate, 81 % of the total amount of SGs present in biodiesel were hydrolyzed by the enzyme. This remarkable reduction in SGs suggests a path for the removal of these contaminants from biodiesel on industrial scale using an environmentally friendly enzymatic process.