The gene encoding human epidermal growth factor (hEGF) was expressed as a fusion protein with the leader peptide and pro I region of alkaline extracellular protease in the yeast Yarrowia lipolytica. hEGF was purified from culture supernatant by reverse-phase chromatography and analysed by Western-blot hybridisations. The biologically active hEGF in the purified sample was assayed using the radioreceptor assay and estimated to be 100 microg/l. However, the level of expression was found to be substantially low compared to the levels of homologous protein, alkaline extracellular protease (AEP), possibly due to degradation by secreted acid protease(s). A novel and sensitive bioassay was developed to determine the biological activity of hEGF produced at low levels and is based on the effect produced by hEGF in the regenerating tails of the wall lizard. Intramuscular injections of culture supernatant from the recombinant yeast and the standard hEGF led to a drastic reduction in tail regeneration confirming the biological activity of the recombinant hEGF.