A dynamic model for the degradation of phenol in a two-phase partitioning bioreactor has been developed based on mechanistic balances around the bioreactor. The key process characteristics including substrate transfer between the organic and aqueous phases, substrate inhibition, oxygen limitation, and cell entrainment were incorporated into the model. The model predictions were validated against existing experimental data obtained for a 2-L bioreactor, and good correlation was observed for the time frames of the simulations, as well as for trends in cell and substrate concentrations. Optimal fed-batch, phenol feeding strategies were then developed based on two approaches: (1) maximization of phenol consumption in a fixed time interval and (2) consumption of a fixed amount of phenol in minimal time. The optimal feeding policies, determined using the Iterative Dynamic Programming algorithm, provided substantial improvements in the amount of phenol consumed when compared to a typical experimental heuristic approach. For example, 45.73 g of phenol was predicted to be consumed in 50 h (not including lag phase) using the optimal feeding profile compared to 10.26 g of phenol consumed in the simulated experimental approach. Oxygen limitation was predicted to be a recurring operational challenge in the partitioning bioreactor, and had a strong impact on the optimization results. (C) 2000 John Wiley & Sons, Inc.