Psycrophilic Pseudomonas aeruginsa NCIM 2036 produces extrcellular lipase. It is one of the important enzymes secreted by organisms involved in spoilage of dairy products like white unsalted butter when stored at low temperature like 2-5ºC resulting in flavor defects. Lipolytic psychrophiles have been extensively studied in the meat and poultry industry but rarely in dary industry. In this study the lipolytic activity of the organism was detected by copper soap formation after 48 h at 4ºC.The extrcellular lipase was collected after inoculation of the organism into tryptone broth. The lipase w as studied with respect to its activity. The optimum pH was found to be 6 and 7 and optimum temperature 5 and 25ºC.