Monoterpenes are a diverse class of compounds with applications as flavors and fragrances, pharmaceuticals and more recently, jet fuels. Engineering biosynthetic pathways for monoterpene production in microbial hosts has received increasing attention. However, monoterpenes are highly toxic to many microorganisms including Saccharomyces cerevisiae, a widely used industrial biocatalyst. In this work, the minimum inhibitory concentration (MIC) for S. cerevisiae was determined for five monoterpenes: β-pinene, limonene, myrcene, γ-terpinene, and terpinolene (1.52, 0.44, 2.12, 0.70, 0.53 mM, respectively). Given the low MIC for all compounds tested, a liquid two-phase solvent extraction system to alleviate toxicity during fermentation was evaluated. Ten solvents were tested for biocompatibility, monoterpene distribution, phase separation, and price. The solvents dioctyl phthalate, dibutyl phthalate, isopropyl myristate, and farnesene showed greater than 100-fold increase in the MIC compared to the monoterpenes in a solvent-free system. In particular, the MIC for limonene in dibutyl phthalate showed a 702-fold (308 mM, 42.1 g L−1 of limonene) improvement while cell viability was maintained above 90%, demonstrating that extractive fermentation is a suitable tool for the reduction of monoterpene toxicity. Finally, we estimated that a limonane to farnesane ratio of 1:9 has physicochemical properties similar to traditional Jet-A aviation fuel. Since farnesene is currently produced in S. cerevisiae, its use as a co-product and extractant for microbial terpene-based jet fuel production in a two-phase system offers an attractive bioprocessing option. Biotechnol. Bioeng. 2012; 109: 2513–2522. © 2012 Wiley Periodicals, Inc.