The reduction of lean NOx using ethanol in simulated diesel engine exhaust was carried out over Ag/Al2O3 catalysts in the presence of H2O and SO2. The Ag/Al2O3 catalysts are highly active for the reduction of lean NOx by ethanol but the reaction is accompanied by side reactions to form CH3CHO, CO along with small amounts of hydrocarbons (C3H6, C2H4, C2H2 and CH4) and nitrogen compounds such as NH3 and N2O. The presence of H2O enhances the NOx reduction while SO2 suppresses the reduction. The presence of SO2 along with H2O suppresses the formation of acetaldehyde and NH3. By infrared spectroscopy, it was revealed that the reactivity of NCO species formed in the course of the reaction was greatly enhanced in the presence of H2O. The NCO species readily reacts with NO in the presence of O-2 and H2O at room temperature, being converted to N-2 and CO2 (GO). Addition of SO2 suppresses the formation of NCO species and lowers the reactivity of the NCO species. However, the reduction of NOx is still kept at high conversion levels in the presence of H2O and SO2 over the present catalysts. About 80% of NOx in the simulated diesel engine exhaust was removed at 743 K.