Aim: Pentose- utilizing yeast development by protoplast fusion and sequential mutations and ethanol fermentation using lignocellulosic substrate. Methods and Results: Protoplasts of thermotolerant Saccharomyces cerevisiae and mesophilic, xylose- utilizing Candida shehatae were fused by electrofusion. The fusants were selected based on their growth at 42 degrees C and ability to utilize xylose. The selected best fusant was mutated sequentially and 3 mutant fusants obtained were tested for their stability. The mutant fusant CP11 was found to be stable and used for lignocellulosic fermentation. The Prosopis juliflora wood material was hydrolysed with 1% sulphuric acid initially for 18 h at room temperature and then for 20 min at 121 degrees C. The acid hydrolysate was separated and used for detoxification by ethyl acetate and overliming. The hard cellulosic fraction was hydrolysed with Aspergillus niger crude cellulase enzyme for 18 h at 50 degrees C. The substrate ( 15% w/ v) yielded 84 g l) 1 sugars, representing 80% ( w / w) hydrolysis of carbohydrate content present in the lignocellulosic material. The acid and enzyme hydrolysates were then equally mixed and used for fermentation with the developed fusant yeast ( CP11). The fusant yeast gave an ethanol yield of 0 center dot 459 +/- 0 center dot 012 g g) 1, productivity of 0 center dot 67 +/- 0 center dot 015 g l) 1 h) 1 and fermentation efficiency of 90%. Conclusions: Protoplast fusion followed by sequential mutations method gave a stable and good performing fusant with maximum utilization of reducing sugars in the media. Significance and Impact of the Study: This new method could be applied to develop fusants for better biotechnological applications.