Saccharomyces cerevisiae has the ability to use a variety of different carbon sources to support its growth. Abundant fermentable sugars such as glucose and fructose are metabolized to ethanol that accumulates in the environment. Upon glucose depletion, nonfermentable carbon sources, such as ethanol and glycerol, are sufficient to support growth. However, high ethanol concentrations inhibit yeast growth and can become toxic to the cell. Here we show that YHL010c, a previously uncharacterized gene of S. cerevisiae, is needed by the yeast to adapt to ethanol, either as a sole carbon source or as a stressor. We named the gene ETP1 (Ethanol Tolerance Protein 1) and show that the etp1Delta strain has a growth defect in the presence of ethanol, ETP1 is needed for the ethanol-induced transcriptional activation of the ENA1 promoter and heat shock protein genes (HSP12 and HSP26), and plays a role in ethanol-induced turnover of the low-affinity hexose transporter Hxt3p. In addition, the hypersensitivity of etp1Delta to ethanol stress is partly due to the inability of the mutant to control the level of the cation/H(+) antiporter Nha1p in the cell.