Sustainable biofuel production from renewable biomass will require the efficient and complete use of all abundant sugars in the plant cell wall. Using the cellulolytic fungus Neurospora crassa as a model, we identified a xylodextrin transport and consumption pathway required for its growth on hemicellulose. Reconstitution of this xylodextrin utilization pathway in Saccharomyces cerevisiae revealed that fungal xylose reductases act as xylodextrin reductases, producing xylosyl-xylitol oligomers as metabolic intermediates. These xylosyl-xylitol intermediates are generated by diverse fungi and bacteria, indicating that xylodextrin reduction is widespread in nature. Xylodextrins and xylosyl-xylitol oligomers are then hydrolyzed by two hydrolases to generate intracellular xylose and xylitol. Xylodextrin consumption using a xylodextrin transporter, xylodextrin reductases and tandem intracellular hydrolases in cofermentations with sucrose and glucose greatly expands the capacity of yeast to use plant cell wall-derived sugars and has the potential to increase the efficiency of both first-generation and next-generation biofuel production.