Medium supplementation and process alternatives for fuel ethanol production from dilute acid lignocellulose hydrolysate were investigated. Dilute acid lignocellulose hydrolysate supplemented with enzymatically hydrolysed wheat flour could sustain continuous anaerobic cultivation of Saccharomyces cerevisiae ATCC 96581 if further supplemented with ammonium sulphate and biotin. This medium composition allowed for a hexose utilisation of 73% and an ethanol production of 36 mmol l-1 h-1 in chemostat cultivation at dilution rate 0.10 h-1. Three different methods for cell retention were compared for improved fermentation of supplemented lignocellulose hydrolysate: cell recirculation by filtration, cell recirculation by sedimentation and cell immobilisation in calcium alginate. All three cell retention methods improved the hexose conversion and increased the volumetric ethanol production rate. Recirculation of 75% of the bioreactor outlet flow by filtration improved the hexose utilisation from 76% to 94%. Sedimentation turned out to be an efficient method for cell separation; the cell concentration in the reactor was 32 times higher than in the outflow after 60 h of substrate feeding. However, chemostat and continuous cell recirculation cultures became severely inhibited when the dilution rate was increased to 0.20 h-1. In contrast, an immobilised system kept producing ethanol at a stable level also at dilution rate 0.30 h-1. Biotechnol. Bioeng. 2007; 98: 80-90. © 2007 Wiley Periodicals, Inc.