An NADPH-dependent enzyme that reduces ethyl 2-methylacetoacetate stereoselectively to ethyl (2R)-methyl-(3S)-hydroxybutanoate was purified 730-fold from Escherichia coli. The N-terminal amino acid sequence data obtained from the purified reductase were used to search the E. coli genome, and a single match was found at the start of the yqhE open reading frame. The YqhE protein had been identified previously by Yum et al. as a 2,5-diketo-D-gluconate reductase on the basis of sequence similarity to other bacterial homologues [Yum, D.-Y.; Lee, B.-Y.; Pan, J.-G. Appl. Environ. Microbiol. 1999, 65, 3341-3346]; however, it had not been examined for beta-keto ester reductions. Our results thus link a key enzyme in the microbial production of ascorbate with stereoselective beta-keto ester reductions, two important fields in biocatalysis. The purified YqhE reductase accepts ethyl acetoacetate and a variety of 2-substituted derivatives, and its sequence is similar to other aldose reductase superfamily members that also reduce a-substituted beta-keto esters to syn-(2R,3S) alcohols.