This review considers the effect of ethanol-induced water stress on yeast metabolism and integrity. Ethanol causes water stress by lowering water activity (a(w)) and thereby interferes with hydrogen bonding within and between hydrated cell components, ultimately disrupting enzyme and membrane structure and function. The impact of ethanol on the energetic status of water is considered in relation to cell metabolism. Even moderate ethanol concentrations (5 to 10%, w/v) cause a sufficient reduction of a(w) to have metabolic consequences. When exposed to ethanol, cells synthesize compatible solutes such as glycerol and trehalose that protect against water stress and hydrogen-bond disruption. Ethanol affects the control of gene expression by the mechanism that is normally associated with (so-called) osmotic control. Furthermore, ethanol-induced water stress has ecological implications.