ABSTRACT The current fermentation alcohol industry in the US is based on utilization of glucose and/or starch derived principally from corn. Biomass materials including wood and agricultural residues, newspaper, and other sources of cellulose could provide a source of fermentable sugars for expanding fuel ethanol production. Prospects for the utilization of biomass for conversion to fermentable hexoses and pentoses are continually improving with advances in enzyme technology, specially engineered microorganisms which can ferment pentoses, and improvement in cellulose pretreatments. Technical and economic factors which affect utilization of sugars from biomass are summarized, and the key steps in wet- and dry-milling of corn are described for purposes of comparison. An approach for estimating fermentable sugar costs is presented to gauge the impact of technical improvements on reducing fermentable sugar costs. An analytical framework resulting from this approach facilitates comparison of effects of feedstock costs, by-product credits, differences in technology, and process costs on the cost of fermentable sugars. A systematic strategy for evaluating differences in cost is presented as a tool for making a first comparison of different technologies and feed stock materials for ethanol production. This analysis suggests that fermentable sugars from enzymatic hydrolysis of cellulose must cost no more than 4–5c lb−1 (8·8–11c kg−1), at current conditions, if they are to be economically competitive with fermentable sugars derived from corn.