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 in 1796 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.

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