A Kraft paper mill produces chemical pulp by treating wood chips with white liquor, a mixture of sodium hydroxide, sodium sulfide, and sodium carbonate at 130 - 180ºC. Some of the fine fibers are rejected in the paper making process and eventually become waste material, e.g., paper mill sludge. Its high carbohydrate and low lignin content makes the sludge an attractive feedstock for bioconversion into value-added products including ethanol. We have proven that Kraft paper mill sludge and recycle sludge are easily converted to ethanol by SSF or SSCF without any pretreatment. The sludges, however, are not appropriate for cellulase production because of high ash content. Kraft pulp itself is an ideal substrate for production of cellulase enzymes. Our laboratory data indicate that only about 20 kg of Kraft pulp is required to produce cellulase enzyme that can saccharify one dry-ton of the sludge. In this study, the Kraft pulp was used as the main carbon source for production of cellulase by Trichoderma Reesei, Rut C-30. Partially de-ashed Kraft paper mill sludges were tested as a substrate for production of cellulosic ethanol through fermentation using the cellulase procduced in-house and two different microorganisms -Recombinant E. coli KO-11 (SSCF) and Saccharomyces cerevisiae, NRE- D5A (SSF). The fermentation process proceeded without any major difficulty, and demonstrated ethanol yields comparable to those of pretreated corn stover. It is projected that 70 gallons of ethanol can be produced from these processes per ton of dry sludge. When the SSCF and SSF were operated in fed-batch mode, the ethanol concentration in the broth was increased to 48g/L and 62g/L, respectively.