The recombinant xylose-fermenting Saccharomyces cerevisiae strain harboring xylose reductase (XR) and xylitol dehydrogenase (XDH) from Scheffersomyces stipitis requires NADPH and NAD(+), creates cofactor imbalance, and causes xylitol accumulation during growth on d-xylose. To solve this problem, noxE, encoding a water-forming NADH oxidase from Lactococcus lactis driven by the PGK1 promoter, was introduced into the xylose-utilizing yeast strain KAM-3X. A cofactor microcycle was set up between the utilization of NAD(+) by XDH and the formation of NAD(+) by water-forming NADH oxidase. Overexpression of noxE significantly decreased xylitol formation and increased final ethanol production during xylose fermentation. Under xylose fermentation conditions with an initial d-xylose concentration of 50 g/liter, the xylitol yields for of KAM-3X(pPGK1-noxE) and control strain KAM-3X were 0.058 g/g xylose and 0.191 g/g, respectively, which showed a 69.63% decrease owing to noxE overexpression; the ethanol yields were 0.294 g/g for KAM-3X(pPGK1-noxE) and 0.211 g/g for the control strain KAM-3X, which indicated a 39.33% increase due to noxE overexpression. At the same time, the glycerol yield also was reduced by 53.85% on account of the decrease in the NADH pool caused by overexpression of noxE.