Fermentation of D-xylose by Pichia stipitis was inhibited by acetic acid and the degree of inhibition depended on the acetic acid concentration, the availability of oxygen, and the pH. A 50% inhibition of the volumetric rate of ethanol production occurred at acetic acid concentrations of 0.8 and 13.8 g l-1 at pH 5.1 and 6.5, respectively under anaerobic conditions. No acetic acid was utilized in the absence of oxygen. Under oxygen-limited conditions at pH 6.5, an acid hydrolysate of sugar cane bagasse containing (g l-1) D-xylose (40.9), D-glucose (3.1), L-arabinose (4.5), and acetic acid (9.0) was fermented to ethanol at a rate of 0.15 g(l h)-1, and an ethanol yield of 0.27 g g-1 sugar was obtained. When the hydrolysate was treated with an anion exchange resin, 84% of the acetic acid was removed and the subsequent fermentation resulted in a rate of ethanol production [0.56 g(l h)-1] and an ethanol yield (0.37 g g-1 sugar) similar to that obtained in a xylose-arabinose-glucose medium lacking acetic acid.