A novel long period grating (LPG) inscribed balloon-shaped heterocore-structured plastic optical fibre (POF) sensor is described and experimentally demonstrated for real-time measurement of the ultra-low concentrations of ethanol in microalgal bioethanol production applications. The heterocore structure is established by coupling a 250 μm core diameter POF between two 1000 μm diameter POFs, thus representing a large core—small core—large core configuration. Before coupling as a heterocore structure, the sensing region or small core fibre (SCF; i.e., 250 μm POF) is modified by polishing, LPG inscription, and macro bending into a balloon shape to enhance the sensitivity of the sensor. The sensor was characterized for ethanol–water solutions in the ethanol concentration ranges of 20 to 80 %v/v, 1 to 10 %v/v, 0.1 to 1 %v/v, and 0.00633 to 0.0633 %v/v demonstrating a maximum sensitivity of 3 × 106 %/RIU, a resolution of 7.9 × 10−6 RIU, and a limit of detection (LOD) of 9.7 × 10−6 RIU. The experimental results are included for the intended application of bioethanol production using microalgae. The characterization was performed in the ultra-low-level ethanol concentration range, i.e., 0.00633 to 0.03165 %v/v, that is present in real culturing and production conditions, e.g., ethanol-producing blue-green microalgae mixtures. The sensor demonstrated a maximum sensitivity of 210,632.8 %T/%v/v (or 5 × 106 %/RIU as referenced from the RI values of ethanol–water solutions), resolution of 2 × 10−4%v/v (or 9.4 × 10−6 RIU), and LOD of 4.9 × 10−4%v/v (or 2.3 × 10−5 RIU). Additionally, the response and recovery times of the sensor were investigated in the case of measurement in the air and the ethanol-microalgae mixtures. The experimentally verified, extremely high sensitivity and resolution and very low LOD corresponding to the initial rate of bioethanol production using microalgae of this sensor design, combined with ease of fabrication, low cost, and wide measurement range, makes it a promising candidate to be incorporated into the bioethanol production industry as a real-time sensing solution as well as in other ethanol sensing and/or RI sensing applications.