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Abstract We introduce the kernel-elastic autoencoder (KAE), a self-supervised generative model based on the transformer architecture with enhanced performance for molecular design. KAE employs two innovative loss functions: modified maximum mean discrepancy (m-MMD) and weighted reconstruction (LWCEL). The m-MMD loss has significantly improved the generative performance of KAE when compared to using the traditional Kullback–Leibler loss of VAE, or standard maximum mean discrepancy. Including the weighted reconstruction loss LWCEL, KAE achieves valid generation and accurate reconstruction at the same time, allowing for generative behavior that is intermediate between VAE and autoencoder not available in existing generative approaches. Further advancements in KAE include its integration with conditional generation, setting a new state-of-the-art benchmark in constrained optimizations. Moreover, KAE has demonstrated its capability to generate molecules with favorable binding affinities in docking applications, as evidenced by AutoDock Vina and Glide scores, outperforming all existing candidates from the training dataset. Beyond molecular design, KAE holds promise to solve problems by generation across a broad spectrum of applications.