The preparation of composites of living functional cells and polymers is a major challenge. We have fabricated such "living composites" by preparation of polymeric microtubes that entrap yeast cells. Our approach was the process of coaxial electrospinning in which a core containing the yeast was "spun" within a shell of nonbiodegradable polymer. We utilized the yeast Candida tropicalis, which was isolated from olive water waste. It is particularly useful since it degrades phenol and other natural polyphenols, and it is capable of accumulating ethanol. The electrospun yeast cells showed significant activity of bioremediation of phenol and produced ethanol, and, in addition, the metabolic processes remained active for a prolonged period. Comparison of electrospun cells to planktonic cells showed decreased cell activity; however, the olive water waste after treatment by the yeast was no longer toxic for Escherichia coli, suggesting that detoxification and prolonged viability and activity may outweigh the reduction of efficiency.