The fermentation of sugar into ethanol is one of the earliest biotechnologies employed by humans. The intoxicating effects of ethanol consumption have been known since ancient times. Ethanol has been used by humans since prehistory as the intoxicating ingredient of alcoholic beverages. Dried residue on 9,000-year-old pottery found in China suggests that Neolithic people consumed alcoholic beverages.

The medieval Muslims used the distillation process extensively, and applied it to the distillation of alcohol. The Arab chemist Al-Kindi unambiguously described the distillation of wine in the 9th century.The process later spread from the Middle East to Italy.Production of alcohol from distilled wine was later recorded by the School of Salerno alchemists in the 12th century. Mention of absolute alcohol, in contrast with alcohol-water mixtures, was later made by Raymond Lull in the 14th century.

In China, archaeological evidence indicates that the true distillation of alcohol began during the 12th century Jin or Southern Song dynasties.A still has been found at an archaeological site in Qinglong, Hebei, dating to the 12th century.In India, the true distillation of alcohol was introduced from the Middle East, and was in wide use in the Delhi Sultanate by the 14th century.

In 1796, German-Russian chemist Johann Tobias Lowitz obtained pure ethanol by mixing partially purified ethanol (the alcohol-water azeotrope) with an excess of anhydrous alkali and then distilling the mixture over low heat.French chemist Antoine Lavoisier described ethanol as a compound of carbon, hydrogen, and oxygen, and in 1807 Nicolas-Théodore de Saussure determined ethanol's chemical formula.Fifty years later, Archibald Scott Couper published the structural formula of ethanol. It was one of the first structural formulas determined.

Ethanol was first prepared synthetically in 1825 by Michael Faraday. He found that sulfuric acid could absorb large volumes of coal gas.He gave the resulting solution to Henry Hennell, a British chemist, who found in 1826 that it contained "sulphovinic acid" (ethyl hydrogen sulfate).[110] In 1828, Hennell and the French chemist Georges-Simon Serullas independently discovered that sulphovinic acid could be decomposed into ethanol.Thus, in 1825 Faraday had unwittingly discovered that ethanol could be produced from ethylene (a component of coal gas) by acid-catalyzed hydration, a process similar to current industrial ethanol synthesis.

Ethanol was used as lamp fuel in the United States as early as 1840, but a tax levied on industrial alcohol during the Civil War made this use uneconomical. The tax was repealed in 1906.Use as an automotive fuel dates back to 1908, with the Ford Model T able to run on petrol (gasoline) or ethanol.It fuels some spirit lamps.

Ethanol intended for industrial use is often produced from ethylene.Ethanol has widespread use as a solvent of substances intended for human contact or consumption, including scents, flavorings, colorings, and medicines. In chemistry, it is both a solvent and a feedstock for the synthesis of other products. It has a long history as a fuel for heat and light, and more recently as a fuel for internal combustion engines.