<P><B>Abstract</B></P> <P>A membrane distillation bioreactor with permeate fractional condensation and mechanical vapor compression was developed for bioethanol production. Enhanced ethanol fermentation was achieved with ethanol in <I>situ</I> removal from the fermentation broth. Compared with the batch fermentation, the cell concentration in membrane bioreactor could be increased 26%. The deposited cells on the surface of the PTFE membrane led to membrane fouling. The membrane separation performance could be resumed by water rinse. High ethanol concentration of 421 g/L could be obtained by permeate fractional condensation with the process separation factor increased to 19.2. Mechanical vapor compression made the process energy efficient.</P>