Cyclodextrins (CDs) are used in food, pharmaceutical, and chemical industries, as well as agriculture and environmental engineering. Cyclodextrin glucanotransferase (CGTase) is an important industrial extracellular enzyme which is used to produce CDs and oligosaccharides. We previously developed a novel yeast-surface CGTase expression system which was used for the production of CDs from starch. In the present study, we showed that the presence of CDs may increase the ethanol tolerance of microorganisms. The cell numbers of Saccharomyces cerevisiae and Escherichia coli in the presence of β-cyclodextrin and ethanol were 1,000-fold and 10-fold higher than that without CDs. The yeast strain with the immobilized CGTase produced 13 g CDs/l and 1.8 g ethanol/l when it was incubated in yeast medium supplemented with 4% starch. The effect of CDs on microorganisms suggests a potential application for the co-production of CDs and ethanol.