Escherichia coli strain FBR5, which has been engineered to direct fermentation of sugars to ethanol, was further engineered, using three different constructs, to contain and express the Vitreoscilla hemoglobin gene (vgb). The three resulting strains expressed Vitreoscilla hemoglobin (VHb) at various levels, and the production of ethanol was inversely proportional to the VHb level. High levels of VHb were correlated with an inhibition of ethanol production; however, the strain (TS3) with the lowest VHb expression (approximately the normal induced level in Vitreoscilla) produced, under microaerobic conditions in shake flasks, more ethanol than the parental strain (FBR5) with glucose, xylose, or corn stover hydrolysate as the predominant carbon source. Ethanol production was dependent on growth conditions, but increases were as high as 30%, 119%, and 59% for glucose, xylose, and corn stover hydrolysate, respectively. Only in the case of glucose, however, was the theoretical yield of ethanol by TS3 greater than that achieved by others with FBR5 grown under more closely controlled conditions. TS3 had no advantage over FBR5 regarding ethanol production from arabinose. In 2 L fermentors, TS3 produced about 10% and 15% more ethanol than FBR5 for growth on glucose and xylose, respectively. The results suggest that engineering of microorganisms with vgb/VHb could be of significant use in enhancing biological production of ethanol.