Xylose reductase (XR) is a biocatalyst that converts xylose to xylitol and it has a potential application in the enzyme based production of xylitol from lignocellulosic hydrolysates. However, the development of a successful XR based bioprocess for xylitol production is challenging, due to the presence of inhibitory lignocellulose derived by-products (LDBs) in hydrolysates. Though various methods have been developed to mitigate the toxic effects of LDBs, none of them were promising. One of the reasons for this, could be the lack of knowledge on the enzyme inhibition mechanisms. Therefore, for the first time, here we investigated mechanisms of XR inhibition by major LDBs using XR from Debaryomyces nepalensis. We found that phenol showed competitive inhibition of XR whereas gallic acid, vanillin, furfural, 5-hydroxymethylfurfural (HMF) and acetate exhibited mixed inhibition. The inhibitory constants (KI) of vanillin, phenol, gallic acid, furfural, HMF and acetate were found to be 0.1, 11, 32, 54, 45 and 100 mM respectively. Moreover, the enzyme stability was drastically affected in the presence of phenols. In addition, molecular docking simulations performed using AutoDock 4.2.6 program revealed the putative binding sites of LDBs on XR and corroborated the experimental data. © 2017 Elsevier B.V.