The bioconversion of xylose into xylitol in fed-batch fermentation with a recombinant Saccharomyces cerevisiae strain, transformed with the xylose-reductase gene of Pichia stipitis, was studied. When only xylose was fed into the fermentor, the production of xylitol continued until the ethanol that had been produced during an initial growth phase on glucose, was depleted. It was concluded that ethanol acted as a redox-balance-retaining co-substrate. The conversion of high amounts of xylose into xylitol required the addition of ethanol to the feed solution. Under O2-limited conditions, acetic acid accumulated in the fermentation broth, causing poisoning of the yeast at low extracellular pH. Acetic acid toxicity could be avoided by either increasing the pH from 4.5 to 6.5 or by more effective aeration, leading to the further metabolism of acetic acid into cell mass. The best xylitol/ethanol yield, 2.4 gg−1 was achieved under O2-limited conditions. Under anaerobic conditions ethanol could not be used as a co-substrate, because the cell cannot produce ATP for maintenance requirements from ethanol anaerobically. The specific rate of xylitol production decreased with increasing aeration. The initial volumetric productivity increased when xylose was added in portions rather than by continuous feeding, due to a more complete saturation of the transport system and the xylose reductase enzyme.