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Sugarcane bagasse is a lignocellulosic residue obtained from sugarcane milling, and a potentially interesting raw material that can be used for fuel ethanol production. In the present study, bagasse was steam pretreated at temperatures between 180 and 205 ◦C, with holding times of 5–10 min using SO2 as a catalyst to determine conditions that provide a good recovery of pentoses and a suitable material for enzymatic hydrolysis. Pretreatment conducted at 190 ◦C for 5 min gave a pentose yield of 57%, with only minor amounts of degradation compounds formed. Commercial cellulolytic enzymes were used to hydrolyze the obtained fiber fractions after pretreatment at different water-insoluble solid contents (2%, 5% and 8% WIS). The overall highest sugar yield achieved from bagasse was 87% at 2% WIS. Fermentation tests were made on both the pentose-rich hemicellulose hydrolysate obtained from the pretreatment, and the enzymatic hydrolysates obtained from the fiber fractions using the xylose-fermenting strain of Saccharomyces cerevisiae TMB3400, as well as the natural xylose-utilizing yeast Pichia stipitis CBS 6054. The pretreatment hydrolysates produced at 2% WIS as well as the enzymatic hydrolysates showed a complete glucose fermentability indicating a low toxicity to the yeasts. The best xylose conversion (more than 60%) was achieved by the strain TMB3400 at 2% WIS. (Less)