The molecular mechanisms of ethanol toxicity and tolerance in bacteria, although important for biotechnology and bioenergy applications, remain incompletely understood. Genetic studies have identified potential cellular targets for ethanol and have revealed multiple mechanisms of tolerance, but it remains difficult to separate the direct and indirect effects of ethanol. We used adaptive evolution to generate spontaneous ethanol-tolerant strains of Escherichia coli, and then characterized mechanisms of toxicity and resistance using genome-scale DNAseq, RNAseq, and ribosome profiling coupled with specific assays of ribosome and RNA polymerase function. Evolved alleles of metJ, rho, and rpsQ recapitulated most of the observed ethanol tolerance, implicating translation and transcription as key processes affected by ethanol. Ethanol induced miscoding errors during protein synthesis, from which the evolved rpsQ allele protected cells by increasing ribosome accuracy. Ribosome profiling and RNAseq analyses established that ethanol negatively affects transcriptional and translational processivity. Ethanol-stressed cells exhibited ribosomal stalling at internal AUG codons, which may be ameliorated by the adaptive inactivation of the MetJ repressor of methionine biosynthesis genes. Ethanol also caused aberrant intragenic transcription termination for mRNAs with low ribosome density, which was reduced in a strain with the adaptive rho mutation. Furthermore, ethanol inhibited transcript elongation by RNA polymerase in vitro. We propose that ethanol-induced inhibition and uncoupling of mRNA and protein synthesis through direct effects on ribosomes and RNA polymerase conformations are major contributors to ethanol toxicity in E. coli, and that adaptive mutations in metJ, rho, and rpsQ help protect these central dogma processes in the presence of ethanol.