Photosynthetic whole-cell biocatalysts are promising platforms for direct production of solar chemicals. Here, we employed the green microalga Chlamydomonas reinhardtii (hereafter Chlamydomonas) as a heterologous host for the cyclohexanone monooxygenase (CHMO) enzyme that converts exogenously added cyclohexanone to ε-caprolactone by utilising photosynthetically produced molecular oxygen (O₂) and nicotinamide adenine dinucleotide phosphate (NADPH). In addition, the innate capability of Chlamydomonas to photoproduce molecular hydrogen (H₂) was utilised in a one-pot stepwise production of H₂ and ε-caprolactone. H₂ photoproduction catalysed by innate O₂-sensitive [Fe-Fe]-hydrogenase was facilitated by initial microoxic conditions and gradually declined due to accumulation of photosynthetic O₂. This was accompanied by the biotransformation of cyclohexanone to ε-caprolactone by the heterologous CHMO. The optimal conditions for the formation of ε-caprolactone were the presence of acetate in the medium (mixotrophia), relatively low light intensity (26 µmol photons m^-2 s^-1) and addition of a low amount of ethanol [1.7% (vol/vol)]. The latter serves as a substrate inhibitor for the innate alcohol dehydrogenase (ADH) driven formation of cyclohexanol from cyclohexanone, thereby preventing competition between CHMO and ADH for the substrate, cyclohexanone. The formation of ε-caprolactone was further improved by introducing a signal sequence at the N-terminus of CHMO that directs the enzyme to the chloroplast enriched both with photosynthetic NADPH and O₂, thus exploiting the compartmentalised nature of Chlamydomonas cell structure. This approach presents new opportunities for photosynthetic green chemicals production.