Fermentation of xylose and rice straw hydrolysate using free and immobilized cells of Candida shehatae (NCL-3501) was studied in batch, fed-batch and continuous culture conditions. In general, ethanol yields (g ethanol/g sugar utilized) were higher with immobilized cells in all reactor types. Fed-batch or continuous cultures exhibited higher ethanol yields and volumetric productivities. Candida shehatae (NCL-3501) efficiently utilized the sugars present in rice straw hemicellulose hydrolysate, prepared by two different methods, within 48 h. In continuous culture, using acid hydrolysate of rice straw, a steady-stare could be maintained for 216 h with a volumetric ethanol productivity of 0.33 g/litre.