A new aerotolerant strain of Clostridium beijerinckii LY-5 was isolated from the pit mud of the Chinese Baijiu-making process for butanol production. Plackett-Burman design and artificial neural network were used to optimize the fermentation medium and a total of 13.54 ± 0.22g/L butanol and 19.91 ± 0.52g/L ABE were attained under aerotolerant condition. Moreover, distillers' grain waste (DGW), the main by-product in the Baijiu production process, was utilized as potential substrate for butanol production. DGW was hydrolyzed by α-amylase and glucoamylase and then fermented after a detoxifying process of overliming. Butanol and ABE concentrations were 9.02 ± 0.18 and 9.57 ± 0.19g/L with the yield of 0.21 and 0.23g/g sugar, respectively. The higher ratio of butanol to ABE might be caused by the inhibitors in DGW medium affecting the metabolic pathways of C. beijerinckii LY-5 and approximately 1.48 ± 0.04g/L isopropanol was found at the end of fermentation. This work highlights the feasibility of using DGW as a promising feedstock for butanol production by a new aerotolerant strain of C. beijerinckii LY-5, with benefit to the environment.