Ethanol and mycelial biomass production from dilute-acid hydrolyzed hemicellulose fraction of rice straw was investigated by cultivation of Mucor indicus and compared with cultivation of Pichia stipitis. The hydrolysis resulted in 189 g xylose and 29 g glucose per kg of the straw used. Anaerobic cultivation of M. indicus resulted in formation of 0.46 g/g ethanol from glucose, while no ethanol but 0.65 g/g xylitol was produced from xylose. However, the fungus could produce ethanol from both hexoses and xylose present in the hydrolyzate aerobically, and yielded totally 0.24 g/g ethanol and 0.37 g/g mycelial biomass. Xylitol and glycerol were also produced by yields 0.18 and 0.08 g/g, respectively. P. stipitis had a better performance in ethanol production at identical conditions with ethanol yield 0.38 g/g of the sugars within the hydrolyzate.