The effect of oxygen on lipase production by Penicillium chrysogenum was studied under two operating modes, controlled aeration rate tested and controlled agitation at dissolved oxygen concentration (DO) 1.00 vvm. Lipase production and cell dry weight were tested in a stirred batch fermenter 5 L. Improvement in oxygen transfer rate (OTR) either by aeration or agitation resulted in an increase in lipase production. Growth curves and lipase activities of P.chrysogenum were examined at agitation rates (200,400,600 rpm), aeration rates (2,4 vvm) at different fermentation periods (24,48,72,96,120 h). Response Surface Methodology (RSM) using Design Expert software was used to study the effect of aeration, agitation, and fermentation time on lipase activity and cell dry weight. These factors were analyzed using 2 1 . 3 2 level factorial design. An optimal set of conditions that maximize lipase production: (2 vvm aeration; 600 rpm agitation after 72 h) was obtained. The maximum lipase activity obtained was 240 U/mL. Beside lipase activity, this paper also studies the optimal combination of the controllable factors (aeration; agitation and fermentation time) that will maximize the cell dry weight.