Background An industrially robust microorganism that can efficiently degrade and convert lignocellulosic biomass into ethanol and next-generation fuels is required to economically produce future sustainable liquid transportation fuels. The anaerobic, thermophilic, cellulolytic bacterium Clostridium thermocellum is a candidate microorganism for such conversions but it, like many bacteria, is sensitive to potential toxic inhibitors developed in the liquid hydrolysate produced during biomass processing. Microbial processes leading to tolerance of these inhibitory compounds found in the pretreated biomass hydrolysate are likely complex and involve multiple genes. Methodology/principal findings In this study, we developed a 17.5% v/v Populus hydrolysate tolerant mutant strain of C. thermocellum by directed evolution. The genome of the wild type strain, six intermediate population samples and seven single colony isolates were sequenced to elucidate the mechanism of tolerance. Analysis of the 224 putative mutations revealed 73 high confidence mutations. A longitudinal analysis of the intermediate population samples, a pan-genomic analysis of the isolates, and a hotspot analysis revealed 24 core genes common to all seven isolates and 8 hotspots. Genetic mutations were matched with the observed phenotype through comparison of RNA expression levels during fermentation by the wild type strain and mutant isolate 6 in various concentrations of Populus hydrolysate (0%, 10%, and 17.5% v/v).