Ethanol has been used by humans since prehistory as the intoxicating ingredient in alcoholic beverages. Dried residues on 9000-year-old pottery found in northern mainland China imply the use of alcoholic beverages even among Neolithic peoples. Its isolation as a relatively pure compound was first achieved by Persian alchemists who developed the art of distillation during the Abbasid caliphate, the most notable of whom was Al-Razi. The writings attributed to Jabir Ibn Hayyan (Geber) (721-815) mention the flammable vapors of boiled wine. Al-Kindī (801-873) unambiguously described the distillation of wine. Distillation of ethanol from water yields a product that is at most 95.6% ethanol, because ethanol forms an azeotrope with water. Absolute ethanol was first obtained in1796 by Johann Tobias Lowitz, by filtering distilled ethanol through charcoal.

Antoine Lavoisier described ethanol as a compound of carbon, hydrogen, and oxygen, and in 1808, Nicolas-Théodore de Saussure determined ethanol's chemical formula, and fifty years later, in 1858,

Archibald Scott Couper published a structural formula for ethanol: this places ethanol among the first chemical compounds to have their chemical structures determined.

Ethanol was first prepared synthetically in 1826, through the independent efforts of Henry Hennel in Great Britain and S.G. Sérullas in France. Michael Faraday prepared ethanol by the acid-catalysed hydration of ethylene in 1828, in a process similar to that used for industrial ethanol synthesis today.

Ethanol served as lamp fuel in pre-Civil War United States and helped power early Model T automobiles. But the fuel couldn't compete with the low cost and availability of petroleum, and ethanol faded from the public eye. The recent rise in oil prices has spurred renewed interest.

The largest single use of ethanol is as a motor fuel and fuel additive. The largest national fuel ethanol industries exist in Brazil (all fuel sold in Brazil contains at least 25% ethanol). One method of production is through fermentation of sugar. Ethanol creates very little pollution when being burned.However, the production process is actually more detrimental to the environment. Millions more acres of land are needed if ethanol is to be used to replace gasoline. Pure ethanol has a lower energy content than gasoline (about 30% less energy per unit volume). At gas stations, ethanol is contained in a mix of ethanol and gasoline, otherwise known as gasohol. In the United States, the color yellow (symbolizing the color of corn) has become associated with the fuel and is commonly used on fuel pumps and labels.

Ethanol is easily soluble in water in all proportions with a slight overall decrease in volume when the two are mixed. Absolute ethanol and 95% ethanol are themselves good solvents, somewhat less polar than water and used in perfumes, paints and tinctures. Other proportions of ethanol with water or other solvents can also be used as a solvent. Alcoholic drinks have a large variety of tastes because various flavor compounds are dissolved during brewing. When ethanol is produced as a mixing beverage it is a neutral grain spirit.

Ethanol is used in medical wipes and in most common antibacterial hand sanitizer gels at a concentration of about 62% (percentage by weight, not volume) as an antiseptic. The peak of the disinfecting power occurs around 70% ethanol; stronger and weaker solutions of ethanol have a lessened ability to disinfect. Solutions of this strength are often used in laboratories for disinfecting work surfaces. Ethanol kills organisms by denaturing their proteins and dissolving their lipids and is effective against most bacteria and fungi, and many viruses, but is ineffective against bacterial spores. Alcohol does not act like an antibiotic and is not effective against infections by ingestion. Ethanol in the low concentrations typically found in most alcoholic beverages does not have useful disinfectant or antiseptic properties, internally or externally.
Wine with less than 16% ethanol cannot protect itself against bacteria. Because of this, port is often fortified with ethanol to at least 18% ethanol by volume to halt fermentation for retaining sweetness and in preparation for aging, at which point it becomes possible to prevent the invasion of bacteria into the port, and to store the port for long periods of time in wooden containers that can 'breathe', thereby permitting the port to age safely without spoiling. Because of ethanol's disinfectant property, alcoholic beverages of 18% ethanol or more by volume can be safely stored for a very long time.