Animal models have been widely used to gain insight into the mechanisms underlying the acute and long-term effects of alcohol exposure. The fruit fly Drosophila melanogaster encounters ethanol in its natural habitat and possesses many adaptations that allow it to survive and thrive in ethanol-rich environments. Several assays to study ethanol-related behaviors in flies, ranging from acute intoxication to self-administration and reward, have been developed in the past 20 years. These assays have provided the basis for studying the physiological and behavioral effects of ethanol and for identifying genes mediating these effects. In this review we describe the ecological relationship between flies and ethanol, the effects of ethanol on fly development and behavior, the use of flies as a model for alcohol addiction, and the interaction between ethanol and social behavior. We discuss these advances in the context of their utility to help decipher the mechanisms underlying the diverse effects of ethanol, including those that mediate ethanol dependence and addiction in humans.