Simultaneous operation of enzymatic reaction and product separation by liquid extraction was developed for continuous synthesis of peptides with high efficiency by using free enzyme continuously. An organic solvent containing substrates was continuously fed into a bioreactor where the enzyme was freely dissolved in a retained aqueous solution. The substrates were extracted from the organic phase to the aqueous phase, where peptide was enzymatically synthesized, and then the peptide was extracted into the organic phase from the aqueous phase at the same time as it was synthesized. Only the organic solvent containing the product peptide was recovered from the bioreactor. In this paper, the precursor of a synthetic sweetener, aspartame, was continuously synthesized from Z-L-aspartic acid and L-phenylalanine methyl ester with thermoase in a stirred tank by the novel method of extractive reaction. The effects of operational conditions on substrates and product concentrations in both the aqueous and organic phases and the yield in the steady state were studied experimentally and theoretically. The yield increased with the residence time of organic solvent and the stirring rotation rate increased, and an almost complete yield was achieved at 10 h of residence time and 450 min(-1) of the stirring rate.