Cellobiose is a major intermediate from cellulase hydrolysis of pretreated plant biomass. Engineering biocatalysts for direct use of cellobiose could eliminate the need for exogenous beta-glucosidase. Additionally, rapid removal of cellobiose in a simultaneous saccharification and fermentation facilitates enzymatic hydrolysis as cellobiose is a potent inhibitor for cellulases. We report here improved cellobiose utilization by engineering Escherichia coli to assimilate the disaccharide both hydrolytically and phosphorolytically (shorter fermentation time). Additionally, we demonstrate that engineering intracellular cellobiose utilization circumvents catabolite repression allowing simultaneous fermentation of xylose and cellobiose. Using meso-2,3-butanediol as model product, we further demonstrate that the accelerated carbon metabolism led to improved product formation (higher titers and shorter fermentation times), illustrating the utility of the engineered biocatalysts in biorefinery applications.