Objective: The present study aimed at isolating proteolytic bacteria from dairy effluent sludge, designing the process parameters for the enhanced production of protease and determination of its fibrinolytic potential. Methods: The dairy sludge was processed according to the microbiological criteria for the isolation of proteolytic bacteria. All the isolates were screened for their protease production ability and the isolate showing highest proteolysis was selected for further studies. Effects of various media components and process parameters like carbon and nitrogen supplementation, temperature, pH and incubation period were investigated. Partial purification of the protease was done using ammonium sulphate fractionation, following which its molecular weight and fibrinolytic activity were determined. Results: Based on the biochemical studies, the selected isolate was identified as Pseudomonas aeruginosa. The highest protease yield was obtained with maltose and yeast extract as supplements. The optimum pH, temperature and incubation period for protease production by the isolate was found to be 7.0, 37℃ and 48 h respectively. The partially purified enzyme preparation showed a single protein band in sodium dodecyl sulphate polyacrylamide gel electrophoresis, revealing the apparent molecular weight of the enzyme to be 35 kDa. The efficient removal of the blood stain emphasized its fibrinolytic potential. Conclusions: From the present study it is envisaged that cultural parameters significantly affect the protease production. Based upon the fibrinolytic activity, this protease may find broad applications in detergent and pharmaceutical industries.