An extracellular lipase producing isolate Staphylococcus sp. MS1 was optimized for lipase production and its biocatalytic potential was assessed. Medium with tributyrin (0.25 %) and without any exogenous inorganic nitrogen source was found to be optimum for lipase production from Staphylococcus sp. MS1. The optimum pH and temperature for lipase production were found to be pH 7 and 37 °C respectively, showing lipase activity of 37.91 U. It showed good lipase production at pH 6–8. The lipase was found to be stable in organic solvents like hexane and petroleum ether, showing 98 and 88 % residual activity respectively. The biotransformation using the concentrated enzyme in petroleum ether resulted in the synthesis of fatty acid methyl esters like methyl oleate, methyl palmitate and methyl stearate. Thus, the lipase under study has got the potential to bring about transesterification of oils into methyl esters which can be exploited for various biotechnological applications.