Butanol tolerance is a complex mechanism affecting the ability of microorganisms to generate economically viable quantities of butanol. The objective of this study was to isolate and characterize butanol tolerant bacterial strains which can act as potential alternative hosts for butanol production. The potential bacterial isolates were screened, based on the non toxic effect on cell growth rate and degradation ability of sago waste which was used as a sole carbon source with butanol enrichment. During this study, it was found that a growth barrier existed between 1 to 5 % butanol concentrations and only few selected isolates could tolerate upto 5 % butanol after long term adaptation. Screening of five isolates proved to be more tolerant, which were identified as Bacillus megaterium, B. aryabhattai, B. tequilensis, and B. circulans using 16S rDNA sequence. These isolates were markedly attractive to identify butanol tolerance specific stress response genes and further engineered to act as a genetic host for biobutanol production.