Lignocellulosic materials are predicted to be major feedstock in second generation bioethanol production. These materials, such as bagasse, rice straw, and switchgrass, are abundant around us. Using lignocellulosic materials will cause bioethanol cheaper thus can compete with fossil based fuel. Bioethanol is believed cleaner than notorious fossil based fuel. However, bioethanol production produced waste during its production processes. The waste is a side effect of using chemical substances at pretreatment and ethanol processing. Among pretreatments used for extracting ethanol from lignocellulosic materials, biological pretreatment is the most environmentally friendly method. Its advantages including no chemical waste and low energy requirement. While for processing the ethanol, enzymatic is the least to use chemicals. This present work is about extracting bioethanol from bagasse using white rot fungi, P. Ostreatus, pretreatment and using cellulose, cellubiase, and xylanase enzymes. Laboratory scale result showed that the ethanol yield was 95%. The research now progresses to the pilot plant. Commercialization is expected started on 2012.