We have examined a highly dynamic section of the Drosophila melanogaster genome which contains neutral lipase family genes that have undergone multiple tandem duplication events. We have identified the orthologous clusters, encoding between five and eight apparently functional lipases, in other Drosophila genomes: yakuba, ananassae, pseudoobscura, virilis, mojavensis, persimilis, grimshawi and willistoni. We examined their gene structure, duplication and pseudogene formation, and the presence of transposable elements. Based on phylogenetic comparisons, the lipase genes contained in each of the clusters fall into four distinct clades. Clades I and II have distinct evolutionary constraints to clades III and IV. Multiple gene duplications have occurred in different lineages of clades I and II while clades III and IV contain a single lipase gene from each species. Compared with lipases from other clades, clade IV genes contain an additional 3' domain of tandemly repeated sequence of varying length and composition, and a substitution in the residue adjacent to the key catalytic serine in the encoded proteins. A comparison of non-synonymous to synonymous nucleotide substitution (dN/dS) rates within each clade showed the highest rate of divergence was between paralogous lipase gene pairs suggesting selection pressure on duplicated genes. Analysis of the encoded lipase protein sequences within each species using PAML identified positively selected sites; structure homology modeling based on human pancreatic lipase indicated many of these residues formed part of the active site of the enzyme. As some of the cluster lipase genes are known to be expressed in the insect midgut and respond to changes in dietary components, we propose that the lipase cluster has undergone dynamic evolutionary changes to maximize absorption of lipid nutrients from the diet.