The recombinant Escherichia coli B strain KO11, containing chromosomally-integrated genes for ethanol production, was developed for use in lignocellulose-to-ethanol bioconversion processes but suffers from instability in continuous culture and a low ethanol tolerance compared to yeast. Here we report the ability cell immobilization to improve its phenotypic stability and ethanol tolerance during continuous culture on a 50 g/L xylose feed. Experiments conducted in a vertical tubular fermentor operated as a liquid-fluidized bed with the cells immobilized on porous glass microspheres were compared to control experiments in the same reactor operated as a chemostat without the support particles. Without cell immobilization the ethanol yield fell sharply following start-up, declining to 60% of theoretical after only 8-9 days of continuous fermentation. While immobilizing the cells did not prevent this decline, it delayed its onset and slowed its rate. With immobilization, a stable high ethanol yield (>85%) was maintained for at least 10 days, thereafter declining slowly, but remaining above 70% even after up to 40 days of fermentation. The ethanol tolerance of E. coli KO11 cells was substantially increased by immobilization on the glass microspheres. In ethanol tolerance tests, immobilized cells released from the microspheres had survival rates 2.3- to 15-fold higher than those of free cells isolated from the same broth. Immobilization is concluded to be an effective means of increasing ethanol tolerance in E. coli KO11. While immobilization was only partially effective in combating its phenotypic instability, further improvements can be expected following optimization of the immobilization conditions.