Dilute-acid lignocellulosic hydrolyzate was successfully fermented to ethanol by encapsulated Saccharomyces cerevisiae at dilution rates up to 0.5h(-1). The hydrolyzate was so toxic that freely suspended yeast cells could ferment it continuously just up to dilution rate 0.1h(-1), where the cells lost 75% of their viability measured by colony forming unit (CFU). However, encapsulation increased their capacity for in situ detoxification of the hydrolyzate and protected the cells against the inhibitors present in the hydrolyzate. While the cells were encapsulated, they could successfully ferment the hydrolyzate at tested dilution rates 0.1-0.5h(-1), and keep more than 75% cell viability in the worst conditions. They produced ethanol with yield 0.44+/-0.01 g/g and specific productivity 0.14-0.17 g/(gh) at all dilution rates. Glycerol was the main by-product of the cultivations, which yielded 0.039-0.052 g/g. HMF present in the hydrolyzate was converted 48-71% by the encapsulated yeast, while furfural was totally converted at dilution rates 0.1 and 0.2h(-1) and partly at the higher rates. Continuous cultivation of encapsulated yeast was also investigated on glucose in synthetic medium up to dilution rate 1.0 h(-1). At this highest rate, ethanol and glycerol were also the major products with yields 0.43 and 0.076 g/g, respectively. The experiments lasted for 18-21 days, and no damage in the capsules was detected.