Introduction of the xylose pathway from Pichia stipitis into Saccharomyces cerevisiae enables xylose utilization in recombinant S. cerevisiae. However, xylitol is a major by-product. An endogenous aldo-keto reductase, encoded by the GRE3 gene, was expressed at different levels in recombinant S. cerevisiae strains to investigate its effect on xylose utilization. In a recombinant S. cerevisiae strain producing only xylitol dehydrogenase (XDH) from P. stipitis and an extra copy of the endogenous xylulokinase (XK), ethanol formation from xylose was mediated by Gre3p, capable of reducing xylose to xylitol. When the GRE3 gene was overexpressed in this strain, the xylose consumption and ethanol formation increased by 29% and 116%, respectively. When the GRE3 gene was deleted in the recombinant xylose-fermenting S. cerevisiae strain TMB3001 (which possesses xylose reductase and XDH from P. stipitis, and an extra copy of endogenous XK), the xylitol yield decreased by 49% and the ethanol yield increased by 19% in anaerobic continuous culture with a glucose/xylose mixture. Biomass was reduced by 31% in strains where GRE3 was deleted, suggesting that fine-tuning of GRE3 expression is the preferred choice rather than deletion.