The sugars present in bio-oil produced by fast pyrolysis can potentially be fermented by microbial organisms to produce cellulosic ethanol. This study shows the potential for microbial digestion of the aqueous fraction of bio-oil in an enrichment medium to consume glucose and produce ethanol. In addition to glucose, inhibitors such as furans and phenols are present in the bio-oil. A pure glucose enrichment medium of 20 g/l was used as a standard to compare with glucose and aqueous fraction mixtures for digestion. Thirty percent by volume of aqueous fraction in media was the maximum additive amount that could be consumed and converted to ethanol. Inhibitors were removed by extraction, activated carbon, air stripping, and microbial methods. After economic analysis, the cost of ethanol using an inexpensive fermentation medium in a large scale plant is approximately $14 per gallon.