Abstract2‐Phenylethanol (2‐PE), a fragrance compound with a rose‐like odor, is widely used in perfumery and cosmetics. Here, we report the first metabolic engineering approach for 2‐PE production in Saccharomyces cerevisiae. 2‐PE can be produced from the catabolism of L‐phenylalanine via Ehrlich pathway, consisting of transamination to phenylpyruvate by Aro9, decarboxylation to phenylacetaldehyde by Aro10, and reduction to 2‐PE by alcohol dehydrogenases. We demonstrated that Ald3 is mainly responsible for phenylacetaldehyde oxidation, competing with 2‐PE production. ALD3 deletion strain overexpressing ARO9 and ARO10 both by episomal overexpression and by induction of the endogenous genes through overexpression of Aro80 transcription factor, produced 4.8 g/L 2‐PE in a medium containing 10 g/L L‐phenylalanine as a sole nitrogen source. Considering the cytotoxicity of 2‐PE, this production titer is almost the upper limit that can be reached in batch cultures, suggesting the great potential of this yeast strain for 2‐PE production. 2‐PE production was further increased by applying two‐phase fermentation method with polypropylene glycol 1200 as an extractant, reaching 6.1 g/L 2‐PE in organic phase with the molar yield of 82.5%, which is about ninefold increase compared with wild type. Biotechnol. Bioeng. 2014;111: 115–124. © 2013 Wiley Periodicals, Inc.