Conversion of agricultural residues, energy crops and forest residues into bioethanol requires hydrolysis of the biomass and fermentation of the released sugars. During the hydrolysis of the hemicellulose fraction, substantial amounts of pentose sugars, in particular xylose, are released. Fermentation of these pentose sugars to ethanol by engineered Saccharomyces cerevisiae under industrial process conditions is the subject of this review. First, fermentation challenges originating from the main steps of ethanol production from lignocellulosic feedstocks are discussed, followed by genetic modifications that have been implemented in S. cerevisiae to obtain xylose and arabinose fermenting capacity per se. Finally, the fermentation of a real lignocellulosic medium is discussed in terms of inhibitory effects of furaldehydes, phenolics and weak acids and the presence of contaminating microbiota.