The stress corrosion cracking (SCC) behavior of X-65 carbon steel was investigated in simulated fuel-grade ethanol (SFGE) using the slow strain rate test method, potentiodynamic polarization, electrochemical impedance spectroscopy, open-circuit potential, and potentiostatic current monitoring. Results indicate that crack initiation on carbon steel in the SFGE environment is associated with plastic deformation in the material, which leads to a surface film breakdown. The competition between active anodic dissolution and repassivation ahead of the crack tip controlled the propagation of these cracks in SFGE. Within the anodic dissolution range, both crack density and crack growth rate in the through-thickness direction increased as the potential increased. The applied cathodic potential eliminated the SCC in this system. The mode of SCC for the carbon steel in aerated SFGE was predominately transgranular.