Imidazolium ionic liquids (IILs) have a range of biotechnological applications, including as pretreatment solvents that extract cellulose from plant biomass for microbial fermentation into sustainable bioenergy. However, residual levels of IILs, such as 1-ethyl-3-methylimidazolium chloride ([C₂C₁im]Cl), are toxic to biofuel-producing microbes, including the yeast Saccharomyces cerevisiae. S. cerevisiae strains isolated from diverse ecological niches differ in genomic sequence and in phenotypes potentially beneficial for industrial applications, including tolerance to inhibitory compounds present in hydrolyzed plant feedstocks. We evaluated >100 genome-sequenced S. cerevisiae strains for tolerance to [C₂C₁im]Cl and identified one strain with exceptional tolerance. By screening a library of genomic DNA fragments from the [C₂C₁im]Cl-tolerant strain for improved IIL tolerance, we identified SGE1, which encodes a plasma membrane multidrug efflux pump, and a previously uncharacterized gene that we named ionic liquid tolerance 1 (ILT1), which encodes a predicted membrane protein. Analyses of SGE1 sequences from our panel of S. cerevisiae strains together with growth phenotypes implicated two single nucleotide polymorphisms (SNPs) that associated with IIL tolerance and sensitivity. We confirmed these phenotypic effects by transferring the SGE1 SNPs into a [C₂C₁im]Cl-sensitive yeast strain using CRISPR/Cas9 genome editing. Further studies indicated that these SNPs affect Sge1 protein stability and cell surface localization, influencing the amount of toxic IILs that cells can pump out of the cytoplasm. Our results highlight the general potential for discovering useful biotechnological functions from untapped natural sequence variation and provide functional insight into emergent SGE1 alleles with reduced capacities to protect against IIL toxicity.