Urea denatured lipase from Chromobacterium viscosum lipase could be refolded by addition of alginate with high guluronic acid content. The refolded molecule could be recovered by affinity precipitation. This approach resulted in recovery of 80% (of original activity) as compared to classical dilution method which gave only 21% activity recovery. Dynamic light scattering showed that binding required about 45 min and activity data obtained from affinity precipitation experiments indicated that refolding was almost instantaneous after binding. Circular dichroism (CD) and fluorescence data showed that refolded molecule was identical to the native molecule. It also showed that refolding takes place at the binding stage and not at the precipitation stage. Preliminary studies showed that the refolding strategy worked equally well with lipases from wheat germ and porcine pancreas.