The heavy consumption of ethanol can lead to alcohol use disorders (AUDs) which impact patients, their families, and societies. Yet the genetic and physiological factors that predispose humans to AUDs remain unclear. One hypothesis is that alterations in mitochondrial function modulate neuronal sensitivity to ethanol exposure. Using Drosophila genetics we report that inactivation of the mitochondrial outer membrane translocator protein 18kDa (TSPO), also known as the peripheral benzodiazepine receptor, affects ethanol sedation and tolerance in male flies. Knockdown of dTSPO in adult male neurons results in increased sensitivity to ethanol sedation, and this effect requires the dTSPO depletion-mediated increase in reactive oxygen species (ROS) production and inhibition of caspase activity in fly heads. Systemic loss of dTSPO in male flies blocks the development of tolerance to repeated ethanol exposures, an effect that is not seen when dTSPO is only inactivated in neurons. Female flies are naturally more sensitive to ethanol than males, and female fly heads have strikingly lower levels of dTSPO mRNA than males. Hence, mitochondrial TSPO function plays an important role in ethanol sensitivity and tolerance. Since a large array of benzodiazepine analogues have been developed that interact with the peripheral benzodiazepine receptor, the mitochondrial TSPO might provide an important new target for treating AUDs.