Biodiesel, as well as other commercially and industrially useful lipids, can be synthesized enzymatically in lieu of other methods. Enzymatic synthesis offers improved specificity and potentially lower manufacturing costs, as nonenzymatic synthesis requires the addition of heat and expensive or dangerous reagents. Numerous microbial enzymes in the lipase family have already been shown to catalyze the synthesis of esters, including biodiesel, under hydrophobic conditions. Enzymatic synthesis of biodiesel by naturally occurring lipases is often hampered by dependence on long-chain alcohol substrates. Enzymes that can employ small alcohols (methanol or ethanol) as substrates are at an advantage because said alcohols are generally much cheaper and less toxic. We have isolated two enzymes from methicillin resistant Staphylococcus aureus that can catalyze the esterification of fatty acid to ethanol to form fatty acid ethyl esters, as they appear to do in vivo. Lipase activity, as well as other lipase-catalyzed reactions such as the synthesis of fatty acid alkyl esters, is often dependent on localization of enzyme and substrate due to the propensity of the substrates to partition in aqueous environments. Lipases have been shown to exhibit unique conformational changes when associating with lipid substrate. These changes thermodynamically enhance enzyme-lipid association, and we have sought to exploit this co-localization by mutating a lipase to recruit additional alcohol to the microenvironment of the lipid substrate. The “rebinding” effect, which has been shown to occur when multiple receptors are closely grouped, reduces diffusion of ligand (or substrate) away from the receptor cluster, increasing the equilibrium ligand concentration local to the cluster. The addition of an alcohol-binding domain derived from the Drosophila melanogaster protein LUSH to the staphylococcal lipase creates a fusion protein with superior substrate colocalization ability. As a result, the rate of fatty acid ethyl ester synthesis is enhanced, in comparison to the wild type lipase, at low ethanol concentrations.