A novel process was developed for extraction of intracellular proteins by combination of cell disruption and aqueous two-phase extraction in a single processing step. A horizontally stirred bead mill was used to perform the cell disruption and the protein extraction simultaneously without using an additional extractor. Polyethylene glycol and ammonium sulfate were added to the cell suspension before disruption. The bead mill worked both as a cell disrupter and as an extractor. The resulting homogenate after disruption was directly centrifuged for phase separation. The target protein was partitioned into the top phase while the cell debris was retained in the bottom phase. Separation of alcohol dehydrogenase (ADH) from yeast and human tumour necrosis factor alpha (cr-TNF) from recombinant Escherichia coli were tested as two model proteins in the new process. The ADH activity was increased in the presence of aqueous two-phase components. The TNF activity was also found to increase in the presence of PEG. This novel process has a good potential for separation of other intracellular biological products.