Heterologous expression of the NAD⁺-dependent phosphite dehydrogenase (PTXD) bacterial enzyme from Pseudomonas stutzerii enables selective growth of transgenic organisms by using phosphite as sole phosphorous source. Combining phosphite fertilization with nuclear expression of the ptxD transgene was shown to be an alternative to herbicides in controlling weeds and contamination of algal cultures. Chloroplast expression of ptxD in Chlamydomonas reinhardtii was proposed as an environmentally friendly alternative to antibiotic resistance genes for plastid transformation. However, PTXD activity in the chloroplast is low, possibly due to the low NAD⁺/NADP⁺ ratio, limiting the efficiency of phosphite assimilation. We addressed the intrinsic constraints of the PTXD activity in the chloroplast and improved its catalytic efficiency in vivo via rational mutagenesis of key residues involved in cofactor binding. Transplastomic lines carrying a mutagenized PTXD version promiscuously used NADP⁺ and NAD⁺ for converting phosphite into phosphate and grew faster compared to those expressing the wild type protein. The modified PTXD enzyme also enabled faster and reproducible selection of transplastomic colonies by directly plating on phosphite-containing medium. These results allow using phosphite as selective agent for chloroplast transformation and for controlling biological contaminants when expressing heterologous proteins in algal chloroplasts, without compromising on culture performance.