Improvement of stress tolerance to various adverse environmental conditions (such as toxic products, high temperature) of the industrial microorganisms is important for industrial applications. Ethanol produced by yeast fermentation is inhibitory to both yeast cell growth and metabolisms, and consequently is one of the key stress elements of brewer's yeast. Research on the biochemical and molecular mechanism of the tolerance of yeast can provide basis for breeding of yeast strain with improved ethanol tolerance. In recent years, employing global gene transcriptional analysis and functional analysis, new knowledge on the biochemical and molecular mechanisms of yeast ethanol tolerance has been accumulated, and novel genes and biochemical parameters related to ethanol tolerance have been revealed. Based on these studies, the overexpression and/or disruption of the related genes have successfully resulted in the breeding of new yeast strains with improved ethanol tolerance. This paper reviewed the recent research progress on the molecular mechanism of yeast ethanol tolerance, as well as the genetic engineering manipulations to improve yeast ethanol tolerance. The studies reviewed here not only deepened our knowledge on yeast ethanol tolerance, but also provided basis for more efficient bioconversion for bio-energy production.