Economic growth depends strongly on the availability and price of fuels. There are various reasons in different parts of the world for efforts to decrease the consumption of fossil fuels, but biofuels are one of the main solutions considered towards achieving this aim globally. As the major bioethanol producer, the yeast Saccharomyces cerevisiae has a central position among biofuel-producing organisms. However, unprecedented challenges for yeast biotechnology lie ahead, as future biofuels will have to be produced on a large scale from sustainable feedstocks that do not interfere with food production, and which are generally not the traditional carbon source for S. cerevisiae. Additionally, the current trend in the development of biofuels is to synthesize molecules that can be used as drop-in fuels for existing engines. Their properties should therefore be more similar to those of oil-derived fuels than those of ethanol. Recent developments and challenges lying ahead for cost-effective production of such designed biofuels, using S. cerevisiae-based cell factories, are presented in this review.