For the purpose of production of fatty acid from fats and oils, the hydrolysis of olive 0:1 by Pseudomonas putida 3SK in an organic-aqueous two phase system was investigated. It was found that Pseudomonas putida 3SK, an organic solvent resistant strain, was grown well in the two-phase system and produced extracellular lipase simultaneously. Among the organic solvents tested, isooctane was selected as the most suitable solvent for this purpose. Log P values of solvents used had a correlation with hydrolysis activity and growth of the strain and critical Log P value for growth of Pseudomonas putida 3SK was found to be about 3 in this system. Straight chain aliphatic hydrocarbons showed relationship between degree of hydrolysis and their Log P values. In order to find out optimal reaction condition, several variables such as volumetric ratio of the two-phase, substrate concentration in organic phase, etc., was investigated. The appropriate volume ratio of aqueous phase (culture media) to isooctane was 5:2 (v/v). The optimal substrate (olive oil) concentration in isooctane was 2g and 3g/20mL isooctane in case of LB and minimal medium, respectively (in which conditions, olive oil would function as carbon source as well). Under the optimized conditions, the result of thin layer chromatography showed that olive oil was hydrolyzed completely in this system. Also, hydrolysis of beef tallow, which is solid at ambient temperature, was found to be feasible in this system.