1. Pneumococci contain an intracellular enzyme of marked lipolytic activity as measured by the acid liberated by its action on tributyrin. 2. Enzyme-containing solutions may be prepared by dissolving pneumococci in bile, or by extraction by other means. 3. The optimum reaction for maximum activity of the endolipase is about pH 7.8, which coincides with the optimum hydrogen ion concentration for growth of pneumococci. 4. Heating the enzyme for 10 minutes at 70 degrees C. destroys its activity. 5. Attenuation of virulence of pneumococcus had no measureable effect on enzyme activity. 6. The possible relation of the endolipase to the mechanism of bile solubility is discussed.