Ethanol production from lignocellulosic biomass is considered more beneficial than its production from starch and sugar based crops, considering the energetics and environmental advantages as well as the readily availability of the feed stock. However, the recalcitrant nature of lignocellulosic materials makes its ethanol production more challenging. Common methods of hydrolysis and fermentation of lignocellulosic materials to ethanol is through the separate hydrolysis and fermentation method (SHF) and the simultaneous saccharification and fermentation method (SSF). During SHF, product inhibition of the enzymes occurs as the sugar concentration increases during the hydrolysis, the process is also associated with increased contamination risk. SSF process makes use of suboptimal conditions for the hydrolysis and the fermentation; also the fermenting organism cannot be reused since it has been mixed with the lignocellulosic biomass. In this study, a new method was developed for hydrolysis and fermentation of lignocellulosic materials to ethanol, called simultaneous saccharification, filtration and fermentation (SSFF). The method allows both the hydrolysis and fermentation at optimum conditions with the use of a membrane bioreactor. It also allows the fermenting organism to be reused for several batches. The method was applied on pretreated spruce using a flocculating yeast strain and also on pretreated wheat straw using encapsulated genetically modified yeast. SSFF was compared with SSF as one of the conventional method, both on 10% suspended solids basis. From pretreated spruce, similar ethanol yield was obtained. Interestingly, from the pretreated wheat straw, 90% ethanol yield of the theoretical value was obtained during the SSFF while just 53% was obtained during the SSF. The study shows that the newly developed method of SSFF has the potential to replace the conventional methods and to improve ethanol production from lignocellulosic biomass.