The present study dealt with the isolation, identification and enzyme characterization of potential luminous bacteria from water, sediment, squid, and cuttle fish samples of the Karaikal coast, Bay of Bengal, India during the study period September 2007 - August 2008. Bioluminescent strains were screened in SWC agar and identified using biochemical tests. As Shewanella henadai was found to be the most common and abundant species with maximum light emission [69,702,240 photons per second (pps)], the optimum ranges of various physicochemical parameters that enhance the luciferase activity in Shewanella hanedai were worked out. The maximum luciferase activity was observed at the temperature of $25^{\circ}C$ (69,674,387 pps), pH of 8.0 (70,523,671 pps), salinity of 20 ppt (71,674,387 pps), incubation period of 16 h (69,895,714 pps), 4% peptone (70,895,152 pps) as nitrogen source, 0.9% glycerol (71,625,196 pps), and the ionic supplements of 0.3% $CaCO_3$ (73,991,591 pps), 0.3% $K_2HPO_4$ (73,919,915 pps), and 0.2% $MgSO_4$ (72,161,155 pps). Shewanella hanedai was cultured at optimum ranges for luciferase enzyme characterization. From the centrifuged supernatant, the proteins were precipitated with 60% ammonium sulfate, dialyzed, and purified using anion-exchange chromatography, and then luciferase was eluted with 500 mM phosphate of pH 7.0. The purified luciferase enzyme was subjected to SDS-PAGE and the molecular mass was determined as 78 kDa.