Ethanol is an important larval resource and toxin for natural Drosophila melanogaster populations, and ethanol tolerance is genetically variable within and among populations. If ethanol-tolerant genotypes have relatively low fitness in the absence of ethanol, as suggested by the results of an earlier study, genetic variation for ethanol tolerance could be maintained by variation in ethanol levels among breeding sites. I selected for ethanol tolerance in large laboratory populations by maintaining flies on ethanol-supplemented media. After 90 generations, the populations were compared with control populations in egg-to-adult survival and development rate on ethanol-supplemented and unsupplemented food. When compared on ethanol-supplemented food, the ethanol-selected populations had higher survival and faster development than the control populations, but on unsupplemented food, the populations did not differ in either trait. These results give no evidence for a ‘trade-off’ between the ability to survive and develop rapidly in the presence of ethanol and the ability to do so in its absence. The effect of physiological induction of ethanol tolerance by exposing eggs to ethanol was also investigated; exposing eggs to ethanol strongly increased subsequent larval survival on ethanol-supplemented food, but did not affect survival on regular food, and slowed development on both ethanol-supplemented and regular food, partly by delaying egg hatch.