Lipase activity and stability was investigated in dialkylimidazolium and pyrrolidinium-based ionic liquids with a variety of anions including hexafluorophosphate, acetate, nitrate, methanesulfonate, trifluoroacetate, and trifluoromethylsulfonate. The initial rate of lipase-catalyzed transesterification of methyl methacrylate in these ionic liquids and several organic solvents was examined as well as the polytransesterification of divinyl adipate and 1,4-butanediol. Free lipase (Candida rugosa) catalyzed the transesterification of methyl methacrylate in 1-butyl-3-methylimidazolium hexafluorophosphate at a rate 1.5 times greater than in hexane. However, no detectable activity was observed in all the “hydrophilic” ionic liquids studied. Methods of enzyme stabilization including adsorption, PEG-modification, and immobilization in polyurethane foam were ineffective in improving enzymatic activity in the hydrophilic ionic liquids. Polytransesterifications performed in 1-butyl-3-methylimidazolium hexafluorophosphate using Novozym 435 produced polyesters with weight average molecular weights limited to 2900 Da due to precipitation of the polymer. Solvatochromic studies and partition coefficient measurements suggest that ionic liquids are more polar and hydrophilic than organic solvents such as hexane, acetonitrile, and tetrahydrofuran. Stability studies indicate that lipases exhibit greater stability in ionic liquids than in organic solvents including hexane.