The demand for renewable and sustainable energy has generated considerable interest in the conversion of cellulosic biomass into liquid fuels such as ethanol using a filamentous fungus. While attempts have been made to study cellulose metabolism through the use of knock-out mutants, there have been no systematic effort to characterize natural variation for cellulose metabolism in ecotypes adapted to different habitats. Here, we characterized natural variation in saccharification of cellulose and fermentation in 73 ecotypes and 89 laboratory strains of the model fungus Neurospora crassa. We observed significant variation in both traits among natural and laboratory generated populations, with some elite strains performing better than the reference strain. In the F1 population N345, 15% of the population outperformed both parents with the top performing strain having 10% improvement in ethanol production. These results suggest that natural alleles can be exploited through fungal breeding for developing elite industrial strains for bioethanol production.