A novel membrane distillation – enzymatic membrane bioreactor (MD-EMBR) system was developed for efficient degradation of trace organic contaminants (TrOCs). Degradation of five TrOCs, namely carbamazepine, oxybenzone, diclofenac, atrazine and sulfamethoxazole was examined using two commercially available laccases (from Trametes versicolor and Aspergillus oryzae). The MD system ensured complete retention (>99%) of both enzyme and TrOCs. Of particular interest was that the complete retention of the TrOCs resulted in high TrOC degradation by both laccases. Oxybenzone and diclofenac degradation in the MD-EMBR ranged between 80 and 99%. Compared to previously developed EMBRs, as much as 40% improvement in the removal of resistant non-phenolic TrOCs (e.g., carbamazepine) was observed. Laccase from A. oryzae demonstrated better TrOC degradation and enzymatic stability. With the addition of redox mediators, namely 1-hydroxybenzotriazole (HBT) or violuric acid (VA), TrOC degradation was improved by 10–20%. This is the first demonstration of a laccase-based high retention membrane bioreactor for enhanced biodegradation of TrOCs.