We have applied the soluble pyridine nucleotide transhydrogenase of Pseudomonas fluorescens to a cell-free system for the regeneration of the nicotinamide cofactors NAD and NADP in the biological production of the important semisynthetic opiate drug hydromorphone. The original recombinant whole-cell system suffered from cofactor depletion resulting from the action of an NADP⁺-dependent morphine dehydrogenase and an NADH-dependent morphinone reductase. By applying a soluble pyridine nucleotide transhydrogenase, which can transfer reducing equivalents between NAD and NADP, we demonstrate with a cell-free system that efficient cofactor cycling in the presence of catalytic amounts of cofactors occurs, resulting in high yields of hydromorphone. The ratio of morphine dehydrogenase, morphinone reductase, and soluble pyridine nucleotide transhydrogenase is critical for diminishing the production of the unwanted by-product dihydromorphine and for optimum hydromorphone yields. Application of the soluble pyridine nucleotide transhydrogenase to the whole-cell system resulted in an improved biocatalyst with an extended lifetime. These results demonstrate the usefulness of the soluble pyridine nucleotide transhydrogenase and its wider application as a tool in metabolic engineering and biocatalysis.