Factors affecting the release of short-chain fatty acids during hydrolysis of a butterfat fraction with a 1,3-positional and short-chain-specific Penicillium roqueforti lipase were investigated. When a short-chain triglyceride fraction was used as substrate, as opposed to whole butterfat, the ratio of desirable flavor short-chain free fatty acids (FFA) to undesirable medium-chain FFA in the FFA fraction increased from 0.75 to 1.80. However, with both substrates, FFA accumulation eventually led to lipase inhibition and limited the total amount of triglyceride hydrolysis. This inhibition phenomenon was principally due to product inhibition. Periodically extracting the FFA with a buffer solution minimized this inhibition phenomenon, thereby significantly increasing lipase activity and the degree of triglyceride hydrolysis. Thus, on-line extraction of FFA in lipase reactors has the potential of greatly increasing system productivity.