Pretreatment is necessary to open up the crystalline structure of the cellulose fibers. It is believed that pretreatment is a “key process” to have an economically feasible ethanol production from lignocelluloses. N-methylmorphilne-N-oxide (NMMO) is a cellulose solvent, which has an industrial application in viscose process for fiber production. NMMO does not produce any toxic waste pollutant and is an environmentally friendly solvent. Considering NMMO as a promising alternative for pretreatment of wood, a novel process for ethanol production from wood was developed in this work. Wood is pretreated by concentrated NMMO and ethanol is produced by NSSF process. Biogas and solid residues are the valuable by products of this process. Simulation of the process with Aspen Plus® was applied to solve the process mass and energy balance; finding the bottlenecks of the process, optimizing the equipment configuration, and providing the necessary data for the equipment design. The economical feasibility of the developed biorefinery for five different plant capacities was studied by Aspen Icarus Process Evaluator®. The base case was designed to utilize 200,000 tons of spruce wood per year and needed M€ 58.3 as total capital investment. Ethanol production yield, based on experiments, was as high as one liter of ethanol per 4 kilograms of wood. Effect of price of feedstock, enzyme, methane, carbon dioxide and solid residue as well as nutrient load on the production cost were investigated.