Industrial production of ε‐caprolactone, the monomer of biodegradable polycaprolactone, consists of acetic acid peroxidation and the Baeyer–Villiger oxidation of cyclohexanone in semi‐batch reactors. The strong exothermic feature of the latter and ease of ε‐caprolactone hydrolysis significantly affects the production efficiency. Here, collective effects of kinetic studies and density functional theory (DFT) calculations reveal activation energy of the Baeyer–Villiger oxidation is higher than that of ε‐caprolactone hydrolysis and the hydrolysis barrier is controlled by hydrogen bond energy of the reaction medium. Then, we developed a microreactor system to intensify heat transfer thereby allowing safe and efficient production of ε‐caprolactone. A yield of 99.6% was achieved within minutes via consecutive two‐step reactions of peroxidation and the Baeyer–Villiger oxidation, as compared with state‐of‐the‐art yield of 96% in hours of industrial operation. The high selectivity is attributed to high reaction temperature allowed by the microreactor and DFT‐guided choice of solvent to mitigate the hydrolysis.