Recent studies at our research group have described an ‘integrated-biorefinery’ model for the existing 1st generation wheat-based ethanol facilities, by using edible filamentous fungus, Neurospora intermedia. The process focuses on the production of 2nd generation ethanol together with fungal biomass (for animal or aquaculture feed applications) from wheat straw. A final ethanol yield of 94% (theoretical maximum based on substrate glucan content) was obtained with N. intermedia fermentation in dilute phosphoric acid pretreated (0.7%w/v acid, 7min at 201±4°C) and enzymatically hydrolyzed (10FPU cellulase/g substrate) straw. Fungal cultivation in liquid straw hydrolysate resulted in a maximum of 3.71±0.11g/L dry fungal biomass. Considering the industrial significance of the fungal process, attempts were made to manipulate N. intermedia to grow as pellet forms in the straw hydrolysate, for the first time. Of the various culture conditions screened, stable pellet morphology was obtained at pH 3.0 to 5.5, resulting in uniform pellets with size ranging from 2.5 to 4.25mm. Fermentation using N. intermedia pellets in the liquid straw hydrolysate, resulted in about 31% increase in the ethanol yield, with an improved glucose assimilation by the pellets (82% reduction) as opposed to filamentous forms (51% reduction), at similar culture conditions. The growth of fungal pellets in presence of inhibitors (at different concentrations of acetic acid and furfural) resulted in about 11% to 45% increase in ethanol production as compared to filamentous forms, at similar growth conditions in the liquid straw hydrolysate. Detailed results on N. intermedia pelletization in liquid straw hydrolysate will be discussed in this presentation.