Formation of xylitol, a byproduct from xylose fermentation, is a major limiting factor in ethanol production from xylose in engineered Zymomonas strains, yet the postulated xylose reductase remains elusive. We report here the discovery of xylose reductase in Zymomonas mobilis and, for the first time, to associate the enzyme function with its gene. Besides xylose and xylulose, the enzyme was active towards benzaldehyde, furfural, 5-hydroxymethyl furfural, and acetaldehyde, exhibiting nearly 150-times higher affinity with benzaldehyde than xylose. The discovery of xylose reductase paves the way for further improvement of xylose fermentation in Z. mobilis. The enzyme may also be used to mitigate toxicity of furfural and other inhibitors from plant biomass.