Renewable fuel production, particularly grain-based ethanol, is expanding rapidly in the USA. Although subsidized grain-based ethanol may provide a competitively priced transportation fuel, concerns exist about potential environmental impacts. This contribution focuses on potential water quality implications of expanded grain-based ethanol production and potential impacts of perennial-grass-based cellulosic ethanol. Expanded grain-based ethanol will increase and intensify corn production. Even with recommended fertilizer and land conservation measures, corn acreage can be a major source of N loss to water (20-40 kg ha(-1) yr(-1)). A greater acreage of corn is estimated to increase N and P loss to water by 37% (117 million kg) and 25% (9 million kg), respectively, and measures to encourage adoption of conservation practices are essential to mitigate water quality impairments. Dried distiller's grains remaining after ethanol production from corn grain are used as animal feed and can increase manure P content and may increase N content. Cellulosic fuel-stocks from perennials such as switchgrass and woody materials have the potential to produce ethanol. Although production, storage, and handling of cellulosic materials and conversion technology are limitations, accelerating development of cellulosic ethanol has the potential to reduce dependence on grain fuel-stocks and provide water quality and other environmental benefits. All alternative fuel production technologies could have environmental impacts. There is a need to understand these impacts to help guide policy and help make programmatic and scientific decisions that avoid or mitigate unintended environmental consequences of biofuel production.