Fatty alcohols are value-added chemicals and important components of a variety of industries, which have a >3 billion-dollar global market annually. Long chain fatty alcohols (>C12) are mainly used in surfactants, lubricants, detergents, pharmaceuticals and cosmetics while medium chain fatty alcohols (C6–C12) could be used as diesel-like biofuels. Microbial production of fatty alcohols from renewable feedstock stands as a promising strategy to enable sustainable supply of fatty alcohols. In this study, we report, for the first time, that medium chain fatty alcohols could be produced in yeast via targeted expression of a fatty acyl-CoA reductase (TaFAR) in the peroxisome of Saccharomyces cerevisiae. By tagging TaFAR enzyme with peroxisomal targeting signal peptides, the TaFAR could be compartmentalized into the matrix of the peroxisome to hijack the medium chain fatty acyl-CoA generated from the beta-oxidation pathway and convert them to versatile medium chain fatty alcohols (C10 & C12). The overexpression of genes encoding PEX7 and acetyl-CoA carboxylase further improved fatty alcohol production by 1.4-fold. After medium optimization in fed-batch fermentation using glucose as the sole carbon source, fatty alcohols were produced at 1.3 g/L, including 6.9% 1-decanol, 27.5% 1-dodecanol, 2.9% 1-tetradecanol and 62.7% 1-hexadecanol. This work revealed that peroxisome could be engineered as a compartmentalized organelle for producing fatty acid-derived chemicals in S. cerevisiae.