Ethanol is naturally produced by the fermentation of sugars by yeasts or via petrochemical processes, and is most commonly consumed as a popular recreational drug. It also has medical applications as an antiseptic and disinfectant. The compound is widely used as a chemical solvent, either for scientific chemical testing or in synthesis of other organic compounds, and is a vital substance used across many different kinds of manufacturing industries. Ethanol is also used as a clean-burning fuel source.

Ethanol is used in medical wipes and most commonly in antibacterial hand sanitizer gels as an antiseptic for its bactericidal and anti-fungal effects. Ethanol kills organisms by denaturing their proteins and dissolving their lipids and is effective against most bacteria and fungi, and many viruses. However, ethanol is ineffective against bacterial spores. 70% ethanol is the most effective concentration, particularly because of osmotic pressure. Absolute ethanol may inactivate microbes without destroying them because the alcohol is unable to fully permeate the microbe's membrane. Ethanol can also be used as a disinfectant and antiseptic because it causes cell dehydration by disrupting the osmotic balance across cell membrane, so water leaves the cell leading to cell death.

According to an industry advocacy group, ethanol as a fuel reduces harmful tailpipe emissions of carbon monoxide, particulate matter, oxides of nitrogen, and other ozone-forming pollutants. Argonne National Laboratory analyzed greenhouse gas emissions of many different engine and fuel combinations, and found that biodiesel/petrodiesel blend (B20) showed a reduction of 8%, conventional E85 ethanol blend a reduction of 17% and cellulosic ethanol 64%, compared with pure gasoline.

Sweet sorghum is another potential source of ethanol, and is suitable for growing in dryland conditions. The International Crops Research Institute for the Semi-Arid Tropics (ICRISAT) is investigating the possibility of growing sorghum as a source of fuel, food, and animal feed in arid parts of Asia and Africa. Sweet sorghum has one-third the water requirement of sugarcane over the same time period. It also requires about 22% less water than corn (also known as maize). The world’s first sweet sorghum ethanol distillery began commercial production in 2007 in Andhra Pradesh, India.

Hydrogen bonding causes pure ethanol to be hygroscopic to the extent that it readily absorbs water from the air. The polar nature of the hydroxyl group causes ethanol to dissolve many ionic compounds, notably sodium and potassium hydroxides, magnesium chloride, calcium chloride, ammonium chloride, ammonium bromide, and sodium bromide. Sodium and potassium chlorides are slightly soluble in ethanol. Because the ethanol molecule also has a nonpolar end, it will also dissolve nonpolar substances, including most essential oils and numerous flavoring, coloring, and medicinal agents.

Sugars for ethanol fermentation can be obtained from cellulose. Deployment of this technology could turn a number of cellulose-containing agricultural by-products, such as corncobs, straw, and sawdust, into renewable energy resources. Other agricultural residues such as sugar cane bagasse and energy crops such as switchgrass may also be a sources of fermentable sugars.

Membranes can also be used to separate ethanol and water. Membrane-based separations are not subject to the limitations of the water-ethanol azeotrope because the separations are not based on vapor-liquid equilibria. Membranes are often used in the so-called hybrid membrane distillation process. This process uses a pre-concentration distillation column as first separating step. The further separation is then accomplished with a membrane operated either in vapor permeation or pervaporation mode. Vapor permeation uses a vapor membrane feed and pervaporation uses a liquid membrane feed.

Pure ethanol and alcoholic beverages are heavily taxed as psychoactive drugs, but ethanol has many uses that do not involve its consumption. To relieve the tax burden on these uses, most jurisdictions waive the tax when an agent has been added to the ethanol to render it unfit to drink. These include bittering agents such as denatonium benzoate and toxins such as methanol, naphtha, and pyridine. Products of this kind are called denatured alcohol.

The fermentation of sugar into ethanol is one of the earliest biotechnologies employed by humans. The intoxicating effects of ethanol consumption have been known since ancient times. Ethanol has been used by humans since prehistory as the intoxicating ingredient of alcoholic beverages. Dried residue on 9,000-year-old pottery found in China suggests that Neolithic people consumed alcoholic beverages.