Lignin, the most abundant renewable source of aromatic compounds on earth, remains underexploited in traditional biorefining. Fraxetin, a naturally occurring flavonoid, has garnered considerable attention in the scientific community due to its diverse and potent biological activities such as antimicrobial, anticancer, antioxidant, anti-inflammatory, and neurological protective actions. To enhance the green and value-added utilization of lignin, Saccharomyces cerevisiae was engineered as a cell factory to transform lignin derivatives to produce fraxetin. The expression of scopoletin 8-hydroxylase (S8H) and coumarin synthase (COSY) enabled S. cerevisiae to produce fraxetin from ferulic acid, one of the three principal monomers. The optimized fermentation strategies produced 19.1 mg/L fraxetin from ferulic acid by engineered S. cerevisiae. Additionally, the engineered cell factory achieved a fraxetin titer of 7.7 mg/L in lignin hydrolysate. This study successfully demonstrates the biotransformation of lignin monomers and lignin hydrolysate into fraxetin using a S. cerevisiae cell factory, thereby providing a viable strategy for the valorization of lignin. KEY POINTS: • AtS8H showed substance specificity in the hydroxylation of scopoletin. • AtCOSY and AtS8H were key enzymes for converting ferulic acid into fraxetin. • Yeast was engineered to produce fraxetin from lignin hydrolysate.