Microbial lipase has been recognized as one of the important biocatalysts due to its widely diversified enzymatic properties and substrate specificities. With the increased awareness of environmental protection and cost issue, lipase- catalyzed reactions have been viewed as the sustainable replacement for the chemical-driven reactions used in manufacture of biochemical products, biopharmaceuticals, nutraceuticals, foods and agrochemicals. However, production of lipases derived from microbial origin would normally require an effort-intensive purification step owing to the complexity of culture broth and the necessity of retaining lipase’s bioactive state. A great variety of lipases from bacterial and fungal sources have been purified to homogeneity by using general purification strategies such as precipitation and chromatographic separation. As a whole, these traditional purification techniques are usually multi-steps, laborious, non-specific, operated at small scale and potentially unsatisfactory in term of purity level. Alternative purification methods are therefore being explored in order to improve the overall yield and reduce the processing time. Advances in the purification methods have greatly expanded the choices of selection in designing the highly specialized purification scheme for various microbial lipases. This review focuses on the application of aqueous two-phase system (ATPS) as an alternative bioseparation method used in the purification of lipase from microbial sources. Moreover, the integration of ATPS in bioprocessing units such as fermentation as well as other purification technique was also reviewed.