Various ketoreductases exclusively participate in all common biological events, and they are a class of important biocatalysts for the production of chiral alcohols. While many types of ketoreductase have been extensively studied and their functions, properties and utilities have been well known, the capability of stereoselectively reducing two carbonyl groups in the same diketohexanoate ester molecule to form a dihydroxy product by a single ketoreductase has not been evidently characterized. Here we show that a unique and novel enzyme, diketoreductase, was cloned from Acinetobacter baylyi, heterogeneously expressed in _Escherichia coli_ and purified to homogeneity. The diketoreductase is up to 78% homologous to bacterial 3-hydroxyacyl coenzyme-A reductases. However, recombinant diketoreductase does not reduce HMG-CoA, showing that the inference of function of enzymes like the diketoreductase based on sequence homology may be in error. The enzyme directly converts a β,δ-diketo ester to the corresponding dihydroxy ester. More remarkably, our results demonstrate that the recombinant enzyme possesses unprecedented stereoselectivity with both diastereomeric and enantiomeric excesses of greater than 99%. This new enzyme is of immediate value in developing a practical biocatalytic route to the side chains of statin drugs, such as Lipitor®.