Lipases are serine hydrolases that catalyze the hydrolysis and synthesis of esters formed from glycerol and long chain fatty acids, by acting at the oil-water interface. Lipases from microbial sources have received heightened attention for an array of industrial applications and these enzymes have been well exploited in the environmental sector as well. In this article, we present an overview of microbial lipase, including the microorganisms from which it could be produced; the application of recombinant DNA technology tools to produce lipase with enhanced properties, the effective use of waste materials as substrates for lipase production; the usage of statistical tools to efficiently optimize the production medium; lipase purification strategies; and the immobilization of the enzyme on a variety of support materials. The next section of the article provides a gist of its application in diversified spheres and focusses exclusively on the environmentally relevant ones. Lipase catalyzed esterification, transesterification and interesterification reactions, an emerging area of green chemistry; lipase mediated in-vitro biopolymer synthesis and degradation; and the application of lipase for remediating fat and oil constituents in wastewater are dealt with in-depth. When its full potential is harnessed, the enzyme could play a pivotal role in environmental management.