Biocatalysis involves the use of enzymes to perform stereo- and enantiospecific reactions producing valuable products in an environmentally benign way. However, the hydrophobic nature of most of the substrates affects the productivity due to poor solubility in aqueous solutions and high toxicity to cells expressing the biocatalyst. These drawbacks could be eliminated by using a solvent tolerant strain, such as Pseudomonas putida S12, to express the biocatalyst in a bi-phasic medium. P. putida S12, known to tolerate saturated concentrations of organic solvents, was transformed with genes expressing monooxygenase or dioxygenase which oxidize naphthalene to naphthol or dihydrodiols, respectively. The use of these recombinant P. putida S12 strains as biocatalysts was explored to improve productivities.