Ethanol-tolerant Arthrobacter simplex is desirable since ethanol facilitates hydrophobic substrates dissolution on an industrial scale. Herein, alterations in compatible solutes were investigated under ethanol stress. The results showed that the amount of trehalose and glycerol increased while that of glutamate and proline decreased. The trehalose protectant role was verified and its concentration was positively related to the degree of cell tolerance. otsA, otsB and treS, three trehalose biosynthesis genes in A. simplex, also enhanced Escherichia coli stress tolerance, but the increased tolerance was dependent on the type and level of the stress. A. simplex strains accumulating trehalose showed a higher productivity in systems containing more ethanol and substrate because of better viability. The underlying mechanisms of trehalose were involved in better cell integrity, higher membrane stability, stronger reactive oxygen species scavenging capacity and higher energy level. Therefore, trehalose was a general protectant and the upregulation of its biosynthesis by genetic modification enhanced cell stress tolerance, consequently promoted productivity.