A N-terminal deleted version of the Saccharomyces cerevisiae phospholipid:diacylglycerol acyltransferase (ScPDAT), lacking the predicted membrane-spanning region, was fused in frame with alpha-factor secretion signal and expressed in Pichia pastoris under the control of the methanol inducible alcohol oxidase promoter. This resulted in a truncated, soluble and highly active PDAT protein secreted into the culture medium of the recombinant cells. The soluble as well as native membrane bound enzymes was shown to be glycosylated and extensive deglycosylation severely lowered the activity. The production of a soluble and extracellular PDAT allowed us to investigate substrate preferences of the enzyme without interference of endogenous lipids and enzymes. Similar to the membrane bound counterpart, the highest activity was achieved with acyl groups at sn-2 position of phosphatidylethanolamine as acyl donor and 1,2-diacylglycerols as acyl acceptor. The soluble enzyme was also able to catalyze, at a low rate, a number of transacylation reactions between various neutral lipids and between polar lipids and neutral lipids others than diacylglycerols, including acylation of long chain alcohols.