The hydroxylation of fatty acids is an appealing reaction in synthetic chemistry, although the lack of selective catalysts hampers its industrial implementation. In this study, we have engineered a highly regioselective fungal peroxygenase for the ω‐1 hydroxylation of fatty acids with quenched stepwise over‐oxidation. One single mutation near the Phe catalytic tripod narrowed the heme cavity, promoting a dramatic shift toward subterminal hydroxylation with a drop in the over‐oxidation activity. While crystallographic soaking experiments and molecular dynamic simulations shed light on this unique oxidation pattern, the selective biocatalyst was produced by Pichia pastoris at 0.4 g L−1 in a fed‐batch bioreactor and used in the preparative synthesis of 1.4 g of (ω‐1)‐hydroxytetradecanoic acid with 95 % regioselectivity and 83 % ee for the S enantiomer. [ABSTRACT FROM AUTHOR]