In the present study, recombinant strains were constructed for xylitol production by cloning and expressing the novel xylitol dehydrogenase (xdh) and alcohol dehydrogenase (adh) genes in E. coli BL21 (DE3) from Gluconobacter thailandicus CGMCC1.3748. The optimum pH, temperature, specific activity and kinetic parameters were further investigated for purified XDH. The co-culture of G. thailandicus (30 g/L), BL21-xdh (20 g/L) and BL21-adh (20 g/L) produced 34.34 g/L of xylitol after 48 h in the presence of 40 g/L D-arabitol and 2% ethanol. The concentration of xylitol produced in this co-biotransformation was found to be 2.7-folds higher than the xylitol yield of G. thailandicus alone, while the yield was increased by 4.8% when compared to that of G. thailandicus mixed with BL21-xdh under the similar experimental conditions.