China is suffering from a sustained shortage of crude oil supply, making fuel ethanol and other biofuels alternative solutions for this issue. However, taking into account the country's large population and dwindling arable land due to rapid urbanization, it is apparent that current fuel ethanol production from grain-based feedstocks is not sustainable, and lignocellulosic biomass, particularly agricultural residues that are abundantly available in China, is the only choice for China to further expand its fuel ethanol production, provided economically viable processes can be developed. In this chapter, cutting edge progress in bioethanol is reviewed, with a focus on the understanding of the molecular structure of the feedstock, leading pretreatment technologies, enzymatic hydrolysis of the cellulose component and strategies for the co-fermentation of the C5 and C6 sugars with engineered microorganisms. Finally, process integration and optimization is addressed with a case study on the COFCO Corporation's pilot plant, and challenges and perspectives for commercial production of bioethanol are highlighted.