Ethanolysis of squid viscera oil with immobilized lipase was investigated for reducing the free fatty acid contents and enhancing the function of the oil by stepwise addition method of Shinmada[1]. Tendency of oil variation during Ethanolysis showed increased content of diglyceride, monoglyceride and fatty acid ethyl ester with reduced free fatty acid contents. The oil composition was analyzed using GC-FID and compared before and after ethanolysis. Structural analysis of the lipid was performed by HPLC-UV spectrophotometer during ethanolysis. The transformed oil was thought to has suitable properties for functional oil production.