The selective dissolution of ferrite phase from the pearlite was studied in fuel-grade ethanol (FGE) to understand how it affects the stress corrosion cracking (SCC) mechanism of carbon steel in FGE. It was shown that microgalvanic coupling occurs between ferrite and cementite phases of the pearlite, leading to localized corrosion, which affects the SCC mechanism. The intergranular SCC mechanism stops at the pearlite, and the selective dissolution promotes the transgranular SCC mechanism. Cathodic polarization curves were measured for pure iron and cementite exposed to various FGE conditions. According to the results, cementite phase is, in most cases, a more favorable cathode in FGE.