In ethanol production from lignocellulose by enzymatic hydrolysis and fermentation, it is desirable to minimize addition of fresh-water and waste-water streams, which leads to an accumulation of substances in the process. This study shows that the amount of fresh water used and the amount of waste water thereby produced in the production of fuel ethanol from softwood, can be reduced to a large extent by recycling of either the stillage stream or part of the liquid stream from the fermenter. A reduction in fresh-water demand of more than 50%, from 3 kg/kg dry raw material to 1.5 kg/kg dry raw material was obtained without any negative effects on either hydrolysis or fermentation. A further decrease in the amount of fresh water, to one-fourth of what was used without recycling of process streams, resulted in a considerable decrease in the ethanol productivity and a slight decrease in the ethanol yield.