SMG1 lipase from Malassezia globosa is a newly found mono- and diacylglycerol (DAG) lipase with a unique lid in loop conformation differing from the common alpha-helix lid. In the present study, we characterized the contribution of three residues, L103 and F104 in the lid, F278 in the rim of binding site groove, to the function of SMG1 lipase. Mutagenesis of these sites were conducted by site-directed mutation and each of the mutants was expressed in the yeast Pichia pastoris, purified, and characterized for activities toward DAG and p-nitrophenol (pNP) ester. Compared to SMG1 wild type, F278A retained about 78% activity toward DAG while only 11% activity toward pNP octanoate (pNP-C8). L103G increased its activity upon pNP-C8 by about 2 folds while F104G showed about 40% decrease in pNP-C8 activity, and they both showed decreased activity upon DAG emulsion. DeleleL103-F104 retained about 30% activity toward DAG emulsion with almost completely loss of pNP-C8 activity. DeleleL103-F104 showed weaker penetration ability to a soybean phosphocholine monolayer than SMG1 WT. Based on the modulation of specificity and activity observed, a pNP-C8 binding model for ester (pNP-C8, N102 and F278 forming flexible bridge) and specific lipid-anchoring mechanism for DAG (L103 and F104 serving as "anchors" to lipid interface) were proposed.