A bacterial strain isolated from an oil contaminated soil, identified as Staphylococcus sp. Lp12 was screened for lipase activity on tributyrin agar and spirit blue agar medium. Maximum lipase production was observed at 48 h of growth (3.5 Eu/ml). Peptone was found to be as an ideal nitrogen source for production at a concentration of 1.0% (4.25 Eu/ml). Addition of any nitrogen source other than peptone to the medium resulted in a significant reduction of enzyme production. Lower lipase production was noted when an inorganic nitrogen source was used as the sole nitrogen source. Starch was used as a major carbon source for optimum production of lipase (4.25 Eu/ml) at a concentration of 1.5%. Of the natural oils, olive oil was able to induce more lipase (4.25 Eu/ml) rather than the oils like groundnut, coconut, castor oils. Basal medium containing tween 80 enhanced lipase production to a significant level. The pH 8 and temperature 45°C were found to be ideal pH and temperature for optimum production of lipase by this strain.