Plasmids containing a Pseudomonas sp. strain 109 extracellular lipase gene (lipL) lacking NH2-terminal sequence and a lipase modulator gene (limL) lacking the NH2-terminal hydrophobic region were constructed and expressed independently in Escherichia coli by using the T7 promoter expression vector system. Recombinant LipL (rLipL) was produced as inclusion bodies, whereas recombinant LimL (rLimL) was present as a soluble protein. During in vitro renaturation of the purified rLipL inclusion bodies after they had been dissolved in 8 M urea, addition of rLimL was essential to solubilize and modulate rLipL. The solubility and activity of rLipL were influenced by the rLimL/rLipL molar ratio; the highest level of solubility was obtained at an rLimL/rLipL ratio of 4:5, whereas the highest activity level was obtained at an rLimL/rLipL ratio of 4:1. After renaturation, rLipL and rLimL were coprecipitated with anti-rLipL antibody, indicating the formation of an rLipL-rLimL complex. Activity of the native lipase purified from Pseudomonas sp. strain 109 was also inhibited by rLimL. By Western blotting (immunoblotting) with anti-rLimL antibody, native LimL was detected in Pseudomonas cells solubilized by sarcosyl treatment. LimL was purified from Pseudomonas sp. strain 109, and the NH2-terminal amino acid sequence was determined to be NH2-Leu-Glu-Pro-Ser-Pro-Ala-Pro-. We propose that to prevent membrane degradation, LimL weakens lipase activity inside the cell, especially in the periplasm, in addition to modulating lipase folding.