Cerium incorporated HZSM-5 (CeHZSM-5) catalyst prepared by impregnation method was tested for aqueous ethanol conversion at 200–400 °C. The CeHZSM-5 catalyst was found to be very active (21.02 %Conversion), compared to the parent HZSM-5 catalyst (9.39 %Conversion), especially at low reaction temperatures (200 °C) and when fed with high water content (80 wt% ethanol). FTIR, FT-Raman, DR-UV, NH3-TPD, IPA-TPD, DSC and contact angle techniques reveal that the incorporation of cerium species into zeolites results in the acidity and hydrophilic/hydrophobic nature. Cerium species are thought to tend to migrate into ZSM-5 channels and associate with the zeolite framework. As a result, the net electrostatic charge decreases due to the presence of tetrahedral cerium atoms. Therefore, the CeHZSM-5 exhibits a hydrophobic character, compared to the parent one. The decrease in competitive adsorption of water versus ethanol feed at the Brønsted acid site may lead to an increase in CeHZSM-5 catalyst activity.