Effective utilization of the lignin by-product is a prerequisite to the commercial viability of ethanol production from softwood wastes using a steam explosion (SE)/enzymatic hydrolysis (EH)/fermentation process. Changes in the chemical composition of Douglas fir wood on SO2-catalyzed SE followed by EH were assessed using conventional analytical methods and new halogen-probe techniques. A significant solubilization of hemicelluloses was observed in the SE stage, the severity of which affected subsequent fermentation of cellulose and sorption of enzymes. SE of softwood resulted in dramatic changes in the chemical structure of lignin in the residual material involving chemical reactions via the benzyl cation. This leads to a more condensed lignin with partly blocked a-reaction centres. Possible uses for this lignin are discussed.