Bio-based production technologies may complement or replace petroleum-based production of chemicals, but they face a number of technical challenges, including product toxicity and/or water insolubility. Plants and microorganisms naturally biosynthesize chemicals that often are converted into derivatives with reduced toxicity or enhanced solubility. Inspired by this principle, we propose a bioderivatization strategy for biotechnological chemicals production, defined as purposeful biochemical derivatization of intended target molecules. As proof of principle, the effects of hydrophobic (e.g., esterification) and hydrophilic (e.g., glycosylation) bioderivatization strategies on the biosynthesis of a relatively toxic and poorly soluble chemical, 1-octanol, were evaluated in Escherichia coli and Synechocystis sp. PCC 6803. The 1-octanol pathway was first optimized to reach product titers at which the host displayed symptoms of toxicity. Solvent overlay used to capture volatile products partially masked product toxicity. Regardless of whether solvent overlay was used, most strains with bioderivatization had a higher molar product titer and product yield, as well as improved cellular growth and glucose consumption, compared with strains without bioderivatization. The positive effect on bioproduction was observed with both the hydrophobic and hydrophilic strategies. Interestingly, in several combinations of genotype/induction strength, bioderivatization had a positive effect on productivity without any apparent effect on growth. We attribute this to enhanced product solubility in the aqueous or solvent fraction of the bioreactor liquid phase (depending on the derivative and medium used), with consequent enhanced product removal. Overall, under most conditions, a benefit of bioproduction was observed, and the bioderivatization strategy could be considered for other similar chemicals as well.