Successful fermentations to produce ethanol using ethanologenic Escherichia coli require tolerance to high concentrations of sugars. Here we demonstrate that irrE, encoding a regulatory protein for radiation-resistance in Deinococcus radiodurans, conferred improved osmotic stress tolerance to E. coli. Expression of the gene protected E. coli cells against 25% glucose or xylose, acid shock. It also markedly improved cellular viability, the transcriptional levels of trehalose biosynthetic genes (otsBA) and trehalose content in the IrrE-expressing strain compared with the control strain. IrrE expression also enhanced the expression levels and enzymatic activities of PDC and ADHB as well as ethanol production. Our results suggest that IrrE could potentially be used to improve osmotic stress tolerance and ethanol production in ethanologenic strains.