The conversion of both xylose and xylitol to ethanol has been demonstrated in cell-free extracts of Pachysolen tannophilus. The facts that xylitol is metabolized in the extracts but not in whole cells in the absence of nystatin demonstrate that transport across the cell membrane limits its metabolism in whole cells. The metabolism of both xylose and xylitol requires NAD and ADP, but the metabolism of xylose requires and NADPH-generating system in addition. Xylose isomerase increases the rate of ethanol formation from xylose, but some xylitol accumulates nevertheless. Therefore, the cell-free system metabolizes xylose as two independent, sequential pathways, one to synthesize xylitol and one to convert it to ethanol. The consequences for process -improvement strategies are discussed.With the increased awareness of the limitations in the world supplies of petroleum came an increased interest in gasoline extenders and additives. The oxygenated additives tert-butyl ether, methanol and ethanol were found to have the additional advantages of octane enhancement and lower rates of air pollution. The use of ethanol on a national scale is associated with further advantages (1,2): the security of fuel sources; a more favorable foreign trade balance; and the renewability of the raw materials for production. Although ethanol can be produced either from a petroleum component or by fermentation, the latter source is the only one associated with all of the advantages above. The most attractive raw materials for ethanol fermentation are cane sugar, corn sugar, and sugar derived from wood and crop residues (lignocellulosic materials). In this country cane sugar is too expensive to be a source of fuel ethanol and com ($98-$104 per ton) (2), can be competitive only in special circumstances, such as government subsidy. However, lignocellulosic material ($20-$70 per ton) could be competitive, if the technical limitations associated with processing and fermentation could be overcome. Although the approximate price of