The effect of ethanol on stability of intact yeast cells has been investigated. Several strains with differences in trehalose metabolism were examined for their ability to survive in the presence of 10% (v/v) ethanol. A positive correlation was observed between cell viability and trehalose concentration. When leakage of electrolytes from the cells was recorded by observing changes in conductivity of the medium, we found that ethanol increases leakage, but the presence of trehalose reverses that effect. Similar studies were done with liposomes of similar composition to those seen in intact cells in log and stationary phases. In the presence of ethanol, carboxyfluorescein trapped in the liposomes leaked to the medium. When trehalose was added inside, outside or on both sides of the membrane, the ethanol-induced leakage was strongly inhibited. More leakage was observed in liposomes in gel phase state than in liquid-crystalline phase, suggesting that the thermotropic behavior of the lipids in the plasma membrane, together with trehalose, plays a role in enhancing ethanol tolerance.