In an aqueous solution, KOH almost completely ionizes to give OH- ions. OH- ion is a strong nucleophile, which leads the alkyl chloride to undergo a substitution reaction to form alcohol.

On the other hand, an alcoholic solution of KOH contains alkoxide (RO- ) ion, which is a strong base. Thus, it can abstract a hydrogen from the β-carbon of the alkyl chloride and form an alkene by eliminating a molecule of HCl.

OH - ion is a much weaker base than RO- ion. Also, OH- ion is highly solvated in an aqueous solution and as a result, the basic character of OH- ion decreases. Therefore, it cannot abstract a hydrogen from the β-carbon.