A lambda gt11 cDNA library was constructed in Escherichia coli using poly(A)-selected mRNA from the fungus, Rhizopus (Rp.) delemar. Lipase-producing members of the library were identified by means of a phenotypic score wherein the release of fatty acids by lipase causes a characteristic color change in the growth medium. One such isolate contained a 1287-bp insert (LIP cDNA) which hybridizes to 1.25- to 1.35-kb mRNA species from Rp. delemar. The lipase produced in E. coli containing the LIP cDNA exhibits the same substrate selectivity as the authentic fungal enzyme, hydrolyzing ester bonds at the stereospecific numbering (sn) sn-1 and sn-3, but not the sn-2, positions of triglycerides. The complete nucleotide sequence of the LIP cDNA was determined. By reference to the N-terminal sequence of authentic Rp. delemar lipase, the lipase-encoding region was identified within this fragment. The LIP cDNA encodes a putative preprolipase consisting of a 26-amino-acid(aa) signal sequence, a 97-aa propeptide, and a 269-aa mature enzyme. The predicted mature lipase has the same molecular weight and aa composition as that of Rp. delemar, is highly homologous to that produced by the fungus Rhizomucor miehei, and contains the consensus pentapeptide (Gly-Xaa-Ser-Yaa-Gly) which is conserved among lipolytic enzymes. It is concluded that the LIP cDNA is an essentially full-length analogue of the lipase-encoding gene of Rp. delemar. The lipase encoded by the LIP cDNA occupies a cytoplasmic location when synthesized in E. coli. Unprocessed forms of the lipase accumulate in E. coli.