Energy crises are widespread particularly in developing countries like Pakistan. Available fuel resources are decreasing day by day causing a remarkable increase in the cost of fuel. Each year Pakistan spends a huge amount of money to import fuel to meet its energy requirements. The need to develop alternate fuel resources is the demand of the day. Studies show that Ethanol can be used as an alternative energy source. Pure Ethanol and mixture of ethanol with other fuels is used in vehicle asfuel in many countries of the world. The paper describes a process to produce ethanol using sugarmolasses and yeast as the raw material. Sugar molasses is the waste of the sugar industry after sugar production. Ethanol is produced from sugar molasses through fermentation. Lab scale Unit is designed and fabricated to perform the experiments and find the effect of various parameters like temperature, dissolved oxygen, mixing effect, PH. Keeping PH between 4.8 to 5, temperature between 30 __ampersandsigndeg;C__ampersandsignndash;37__ampersandsigndeg;C, stirrer speed 150 RPM were found to show the maximum productivity.