This study deals with production of lipase in solid state fermentation by Rhizopus oryzae from sugarcane bagasse. A tray bioreactor was designed for the extracellular enzyme production. Daily, lipase production was evaluated at several incubation temperatures. Furthermore, the influence of temperature and humidity of the cabinet, depth of solid bed, particle size, initial moisture content and supplementary substrate (olive oil) as carbon source was investigated. The obtained results showed that bioreactor temperature of 45 °C, humidity of 80%, solid bed depth of 0.5 cm, particle size in the range of 0.335–1 mm, substrate initial moisture content of 80% for the top tray and 70% for the middle tray and supplementary substrate of 8% (v/w) olive oil led to maximum lipase production. Under optimum fermentation conditions after 72-h incubation, maximum lipase activities for the top, middle and bottom trays were 215.16, 199.36 and 52.64 U gds−1, respectively.