Background: With the discovery of interspecies hydrogen transfer in the late 1960s (Bryant et al. in Arch Microbiol 59:20-31, 1967), it was shown that reducing the partial pressure of hydrogen could cause mixed acid fermenting organisms to produce acetate at the expense of ethanol. Hydrogen and ethanol are both more reduced than glucose. Thus there is a tradeoff between production of these compounds imposed by electron balancing requirements; however, the mechanism is not fully known. Results: Deletion of the hfsA or B subunits resulted in a roughly 1.8-fold increase in ethanol yield. The increase in ethanol production appears to be associated with an increase in alcohol dehydrogenase activity, which appears to be due, at least in part, to increased expression of the adhE gene, and may suggest a regulatory linkage between hfsB and adhE. We studied this system most intensively in the organism Thermoanaerobacterium saccharolyticum; however, deletion of hfsB also increases ethanol production in other thermophilic bacteria suggesting that this could be used as a general technique for engineering thermophilic bacteria for improved ethanol production in organisms with hfs-type hydrogenases. Conclusion: Since its discovery by Shaw et al. (JAMA 191:6457-64, 2009), the hfs hydrogenase has been suspected to act as a regulator due to the presence of a PAS domain. We provide additional support for the presence of a regulatory phenomenon. In addition, we find a practical application for this scientific insight, namely increasing ethanol yield in strains that are of interest for ethanol production from cellulose or hemicellulose. In two of these organisms (T. xylanolyticum and T. thermosaccharolyticum), the ethanol yields are the highest reported to date.