Fuel ethanol production using lignocellulosic feedstocks are widely studied for sustainable supply of clean liquid biofuels. However, high production cost of cellulose, low cell viability of fermentable microbes as well as poor carbon utilization impede economic production. In our recent studies, efficient strains for cellulase production were obtained by genetic engineering of Trichoderma reesei Rut-C30; and cellulase fermentation efficiency was improved by feeding soluble self-prepared inducers. On the other hand, stress tolerance of the budding yeast Saccharomyces cerevisiae was improved by manipulating the expression of key regulatory proteins, and xylose utilization was improved by enhancing oxidative stress tolerance of the recombinant strain using a natural yeast isolate as the host. We propose that strain engineering should be optimized by combining specific fermentation conditions. Further prospects on strain development and process optimization will be provided in the talk.