Zymomonas mobilis is a promising bacterial host for biofuel production, but further improvement has been hindered because some aspects of its metabolism remain poorly understood. For example, one of the main by-products generated by Z. mobilis is acetate, but the pathway for acetate production is unknown. Acetaldehyde oxidation has been proposed as the major source of acetate, and an acetaldehyde dehydrogenase was previously isolated from Z. mobilis via activity guided fractionation, but the corresponding gene has never been identified. We determined that the locus ZMO1754 (also known as ZMO_RS07890) encodes an NADP-dependent acetaldehyde dehydrogenase that is responsible for acetate production by Z. mobilis. Deletion of this gene from the chromosome resulted in a growth defect in oxic conditions, suggesting that acetaldehyde detoxification is an important role of acetaldehyde dehydrogenase. The deletion strain also exhibited a near complete abolition of acetate production, both in typical laboratory conditions and during lignocellulosic hydrolysate fermentation. Our results show that ZMO1754 encodes the major acetate-forming acetaldehyde dehydrogenase in Z. mobilis, and we therefore rename the gene based on functional similarity to the Escherichia coli acetaldehyde dehydrogenase. Biofuel production from nonfood crops is an important strategy for reducing carbon emissions from the transportation industry, but it has not yet become commercially viable. An important avenue to improve biofuel production is to enhance the characteristics of fermentation organisms by decreasing by-product formation via genetic engineering. Here, we identified and deleted a metabolic pathway and associated gene that lead to acetate formation in Zymomonas mobilis. Acetate is one of the major by-products generated during ethanol production by Z. mobilis, so this information may be used in the future to develop better strains for commercial biofuel production.