Xylitol is naturally occurring in small amounts in plums, strawberries, cauliflower, and pumpkin; humans and animals make trace amounts during metabolism of carbohydrates. Unlike most sugar alcohols, xylitol is achiral. Most other isomers of pentane-1,2,3,4,5-pentol are chiral, but xylitol has a plane of symmetry.

Industrial production starts with lignocellulosic biomass from which xylan is extracted; raw biomass materials include hardwoodssoftwoods, and agricultural waste from processing maize, wheat, or rice. The xylan polymers can be hydrolyzed into xylose, which is catalytically hydrogenated into xylitol. The conversion changes the sugar (xylose, an aldehyde) into the primary alcohol, xylitol. Impurities are then removed. The processing is often done using standard industrial methods; industrial fermentation involving bacteria, fungi, or yeast, especially Candida tropicalis, are common, but are not as efficient.

Xylitol is used as a sugar substitute in manufactured products, such as drugs or dietary supplementsconfectionstoothpaste, and chewing gum, but is not a common household sweetener. Xylitol has negligible effects on blood sugar because it is metabolized independently of insulin. Absorbed more slowly than sugar, xylitol supplies 40% fewer calories than table sugar.

Xylitol has about the same sweetness as sucrose, but more sweetness than similar compounds like sorbitol and mannitol. Xylitol is stable enough to be used in baking. Because xylitol and other polyols are heat stable, they do not caramelise as sugars do, and they also lower the freezing point of mixtures in which they are used.