In this study, extracellular lipase was produced by Serratia marcescens wild type and three mutant strains. The maximum lipase activity (80 U/mL) was obtained with the SMRG4 mutant strain using soybean oil. Using a 2 factorial design, the lipase production increased 1.55-fold (124 U/mL) with 4% and 0.05% of soybean oil and Triton X-100, respectively. The optimum conditions for maximum lipase activity were 50 °C and pH 8. However, the enzyme was active in a broad range of pH (6-10) and temperatures (5-55 °C). This lipase was stable in organic solvents and in the presence of oxidizing agents. The enzyme also proved to be efficient for the removal of triacylglycerol from olive oil in cotton cloth. A Box-Behnken experimental design was used to evaluate the effects of the interactions between total lipase activity, buffer pH, and wash temperatures on oil removal. The model obtained suggested that all selected factors had a significant impact on oil removal, with optimum conditions of 550 U lipase, 45 °C, pH 9.5, with 79.45% removal. Biotransformation of waste frying oil using the enzyme and in presence of methanol resulted in the synthesis of methyl esters such as methyl oleate, methyl palmitate, and methyl stearate.