A novel in situ product removal (ISPR) method that uses microcapsules to extract inhibitory products from the reaction suspension is introduced into fermentation technology. More specifically, L-phenylalanine (L-Phe) was transformed by Saccharomyces cerevisiae to 2-phenylethanol (PEA), which is inhibitory toward the yeast. In order to continuously remove PEA from the vicinity of the cells, the reaction suspension was brought into contact with capsules of 2.2-mm diameter that had a hydrophobic core of dibutyl sebacate and an alginate-based wall. This novel process combines the advantages of a normal in situ extraction process (fast mass transfer and simple process set-up) with the benefits of a membrane-based process (reduction of the solvent toxicity and avoidance of stable emulsions). In particular, the microbial cells are shielded from the phase toxicity of the organic solvent by a hydrogel layer surrounding the organic core. By placing the microcapsules into the fermenter, the final overall concentration of PEA in a fed-batch culture was increased from 3.8 to 5.6 g/L because a part of the inhibitory product dissolved in the dibutyl sebacate core. In another fermentation experiment, the capsules were placed in a fluidized bed that was connected via a loop to the fermenter. In addition, the fluidized bed was connected via a second loop to a back-extractor to regenerate the capsules. By alternating the extraction and back-extraction cycles, it was possible to limit the PEA concentration of the fed-batch culture in the fermenter to 2.4 g/L while producing important quantities of PEA that accumulated in an external reservoir. (C) 2003 Wiley Periodicals, Inc.