Sugarcane bagasse was pre-treated by steam explosion at 205 and 215degreesC and hydrolysed with cellulolytic enzymes. The hydrolysates were subjected to enzymatic detoxification by treatment with the phenoloxidase laccase and to chemical detoxification by overliming. Approximately 80% of the phenolic compounds were specifically removed by the laccase treatment. Overliming partially removed the phenolic compounds, but also other fermentation inhibitors such as acetic acid, furfural and 5-hydroxy-methyl-furfural. The hydrolysates were fermented with the recombinant xylose-utilising Saccharomyces cerevisiae laboratory strain TMB 3001, a CEN.PK derivative with over-expressed xylulokinase activity and expressing the xylose reductase and xylitol dehydrogenase of Pichia stipitis, and the S. cerevisiae strain ATCC 9658 1, isolated from a spent sulphite liquor fermentation plant. The fermentative performance of the lab strain in undetoxified hydrolysate was better than the performance of the industrial strain. An almost two-fold increase of the specific productivity of the strain TMB 3001 in the detoxified hydrolysates compared to the undetoxified hydrolysates was observed. The ethanol yield in the fermentation of the hydrolysate detoxified by overliming was 0.18 g/g dry bagasse, whereas it reached only 0.13 g/g dry bagasse in the undetoxified hydrolysate. Partial xylose utilisation with low xylitol formation was observed.