Biotransformations catalyzed by free and immobilized enzymes have been carried out in aqueous suspensions with up to 25% (w/w) precipitated substrate or product. For the kinetically controlled synthesis of N-Acetyl-Tyr-Arg-NH2 with up to 0.8 M insoluble activated substrate N-Acetyl-TyrOEt catalyzed by alpha-chymotrypsin (EC 3.4.21.1) the dipeptide yield was found to be >90%. This and the space-time yields were higher than those observed for one-phase aqueous systems and much higher than in systems where the insoluble substrate had been solubilized by addition of organic solvents. In the equilibrium controlled hydrolysis of 0.4 M D-phenylglycine-amide catalyzed by immobilized penicillin amidase (EC 3.5.1.11) the product precipitates. The enzyme immobilized in the support with the smallest pores could be reused without reduction in the rate due to precipitation in the pores. This decreases the number of immobilized enzyme molecules that can be used as biocatalysts. The latter was observed for supports with larger pores as the solubility decreases with increasing particle size. These results demonstrate that biotransformations with insoluble substrates or products using free or immobilized enzymes can be easily carried out in aqueous two-phase systems, without organic solvents, provided that the pore sizes of the supports are sufficiently small and that the rate of mass transfer from the precipitated substrate is large. The latter increases with decreasing particle size.