Xylose fermentation by Saccharomyces cerevisiae requires the introduction of a xylose pathway, either similar to that found in the natural xylose-utilizing yeasts Pichia stipitis and Candida shehatae or similar to the bacterial pathway. The use of NAD(P)H-dependent XR and NAD+-dependent XDH from P. stipitis creates a cofactor imbalance resulting in xylitol formation. The effect of replacing the native P. stipitis XR with a mutated XR with increased KM for NADPH (Kostrzynska et al., 1998: FEMS Microbiol Lett 159:107–112) was investigated for xylose fermentation to ethanol by recombinant S. cerevisiae strains. Enhanced ethanol yields accompanied by decreased xylitol yields were obtained in strains carrying the mutated XR. Flux analysis showed that strains harboring the mutated XR utilized a larger fraction of NADH for xylose reduction. The overproduction of the mutated XR resulted in an ethanol yield of 0.40 g per gram of sugar and a xylose consumption rate of 0.16 g per gram of biomass per hour in chemostat culture (0.06/h) with 10 g/L glucose and 10 g/L xylose as carbon source. © 2005 Wiley Periodicals, Inc.