Background: Lipases (EC 126.96.36.199) catalyze the hydrolysis of triacyl glycerol to glycerol and are involved in the synthesis of both short chain and long chain acylglycerols. They are widely used industrially in various applications, such as baking, laundry detergents and as biocatalysts in alternative energy strategies. Marine ecosystems are known to represent a large reservoir of biodiversity with respect to industrially useful enzymes. However the vast majority of microorganisms within these ecosystems are not readily culturable. Functional metagenomic based approaches provide a solution to this problem by facilitating the identification of novel enzymes such as the halo-tolerant lipase identified in this study from a marine sponge metagenome.Results: A metagenomic library was constructed from the marine sponge Haliclona simulans in the pCC1fos vector, containing approximately 48,000 fosmid clones. High throughput plate screening on 1% tributyrin agar resulted in the identification of 58 positive lipase clones. Following sequence analysis of the 10 most highly active fosmid clones the pCC1fos53E1 clone was found to contain a putative lipase gene lpc53E1, encoded by 387 amino acids and with a predicted molecular mass of 41.87 kDa. Sequence analysis of the predicted amino acid sequence of Lpc53E1 revealed that it is a member of the group VIII family of lipases possessing the SXTK motif, related to type C beta-lactamases. Heterologous expression of lpc53E1 in E. coli and the subsequent biochemical characterization of the recombinant protein, showed an enzyme with the highest substrate specificity for long chain fatty acyl esters. Optimal activity was observed with p-nitrophenyl palmitate (C-16) at 40 degrees C, in the presence of 5 M NaCl at pH 7; while in addition the recombinant enzyme displayed activity across broad pH (3-12) and temperature (4 -60 degrees C) ranges and high levels of stability in the presence of various solvents at NaCl concentrations as high as 5 M and at temperatures ranging from 10 to 80 degrees C. A maximum lipase activity of 2,700 U/mg was observed with 10 mM p-nitrophenyl palmitate as substrate, in the presence of 5 mM Ca2+ and 5 M NaCl, and a reaction time of 15 min at pH 7 and 40 degrees C; while K-M and Vmax values were calculated to be 1.093 mM(-1) and 50 mu mol/min, respectively.Conclusion: We have isolated a novel halo tolerant lipase following a functional screen of a marine sponge fosmid metagenomic library. The activity and stability profile of the recombinant enzyme over a wide range of salinity, pH and temperature; and in the presence of organic solvent and metal ions suggests a utility for this enzyme in a variety of industrial applications.