Lactobacillus fermentum is a lactic acid bacterium of probiotic importance, which is found ubiquitously in fermented milk products. Bile salt hydrolase (BSH) has a significant role in affording probiotic properties to lactobacilli. In the present study, two bsh genes encoding BSH1 and BSH2 were identified from the draft genome sequence of L. fermentum MTCC 8711. Nucleotide comparison revealed no significant similarity between bsh1 and bsh2 genes, whereas the deduced amino acid sequences showed 26 % sequence similarity between both BSH1 and BSH2. Pfam analysis revealed the presence of cys-2 active site residues in the catalytic pocket of both BSH1 and BSH2 highly essential for catalysis. Phylogentic analysis of BSH1 and BSH2 revealed the possible independent origin of these proteins in Lactobacillus. We cloned these genes in pSLp111.3, a Lactobacillus expression vector with signal peptide A (slpA) and expressed in the native L. fermentum strain for overexpression and extracellular secretion. The bsh1 gene failed to express and to produce promising BSH activity. However, bsh2 gene was overexpressed and the recombinant strain showed improved BSH activity. Induction of the recombinant strain with an optimal 2 % xylose concentration secreted 0.5 U/ml of the BSH into extracellular medium. Furthermore, the recombinant strain was able to completely assimilate the 100-μg/ml cholesterol within 24 h, whereas the native strain took 72 h for the complete assimilation of cholesterol.