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.