We report on the development of a whole‐cell biocatalytic system based on the popular host Saccharomyces cerevisiae that shows programmable performance and good atom economy in the reduction of α‐keto ester substrates. The NADPH‐dependent yeast reductase background was suppressed through the combined effects of overexpression of a biosynthetic NADH‐active reductase (xylose reductase from Candida tenuis) to the highest possible level and the use of anaerobic reaction conditions in the presence of an ethanol co‐substrate where mainly NADH is recycled. The presented multi‐level engineering approach leads to significant improvements in product optical purity along with increases in the efficiency of α‐keto ester reduction and co‐substrate yield (molar ratio of formed α‐hydroxy ester to consumed ethanol). The corresponding α‐hydroxy esters were obtained in useful yields (>50%) with purities of ≥99.4% enantiomeric excess. The obtained co‐substrate yield reached values of greater than 1.0 with acetate as the only by‐product formed. Biotechnol. Bioeng. © 2008 Wiley Periodicals, Inc.