Delignification is the crucial step for the conversion of lignocelluloses to biofuel. In this work, wheat straw delignification was enhanced by a two-step process, comprising hydrothermal and fungal treatments. Wheat straw was exposed to hydrothermal treatment at subcritical temperatures and then subjected to fungal treatment. Lignocellulose hydrolysis rate was significantly higher during the hydrothermal treatment compared to the slower fungal delignification. However, by-products of lignin degradation via hydrothermal treatment were re-deposited on the cellulose fibers as the substrate was cooled to room temperature. It is shown that post-treatment fungi can enhance delignification by degradation of the residual lignin by-products. The effect of fungal delignification of hydrothermally treated substrate was a function of temperature of the hydrothermal process. Compared to the hydrothermal treatment, the novel combined approach, proposed in this study, resulted in two-fold higher delignification and promises to be an effective method for delignified substrate preparation for conversion to biofuel.