A fungus strain ECU2002, capable of enantioselectively hydrolyzing chiral lactones to optically pure hydroxy acids, was newly isolated from soil samples through two steps of screening and identified as Fusarium proliferatum (Matsushima) Nirenberg. From the crude extract of F. proliferatum ECU2002, a novel levo-lactonase was purified to homogeneity, with a purification factor of 460-folds and an overall yield of 9.7%, by ultrafiltration, acetone precipitation, and chromatographic separation through DEAE-Toyopearl, Butyl-Toyopearl, Hydroxyapatite, Toyoscreen-Super Q, and TSK-gel columns. The purified enzyme is a monomer; with a molecular mass of ca 68 kDa and a pI of 5.7 as determined by two-dimensional electrophoresis. The catalytic performance of the partially purified levo-lactonase was investigated, giving temperature and pH optima at 50 degrees C and 7.5, respectively, for gamma-butyrolactone hydrolysis. The substrate specificity of the partially purified lactonase was also examined using several useful lactones, among which alpha-hydroxy-gamma-butyrolactone was the best substrate, with 448-fold higher lactonase activity as compared to gamma-butyrolactone. The F. proliferatum lactonase preferentially hydrolyzed the levo enantiomer of butyrolactones, including beta-butyrolactone, alpha-hydroxy-gamma-butyrolactone, alpha-hydroxy-beta,beta-dimethyl-gamma-butyrolactone (pantolactone), and beta-hydroxy-gamma-butyrolactone, affording (+)-hydroxy acids in high (94.8 approximately 98.2%) enantiomeric excesses (ee) and good conversions (38.2 approximately 44.2%). A simple immobilization of the crude lactonase with glutaraldehyde cross-linking led to a stable and easy-to-handle biocatalyst for catalytic resolution of chiral lactones. The immobilized lactonase also performed quite well in repeated batch resolution of dl-pantolactone at a concentration of 35% (w/v), retaining 67% of initial activity after ten cycles of reaction (corresponding to a half life of 20 cycles) and affording the product in 94 approximately 97% ee, which can be easily enhanced to >99% ee after the d-hydroxy acid was chemically converted into l-lactone and crystallized.