Dilute acid pretreatment of biomass generates enormous amount of hydrolysate (rich in inhibitors and pentose sugars), that remains unutilized for bioethanol production due to inadequacy of efficient C-5-fermenting organisms. In this study, a predominantly pentose fermenting extremely thermophilic bacterium strain DBT-IOC-X2, pertaining to the genus Thermoanaerobacter was isolated from Himalayan hot spring. Batch experiments indicated substantial inhibitor resistance (2g dm(-3) for furfural, 5-HMF, and acetic acid), substrate tolerance (similar to 15g dm(-3)), co-sugar fermentation ability (co-production ethanol yield of 0.29g/g), and high ethanol yield (83.57% and 91.12% of the theoretical maximum from 5 g dm(-3) glucose and xylose, respectively) by the bacterium at 70 degrees C and pH 8.0. Here, bioethanol production process was developed using pre-treated rice straw hydrolysate (PRSH) as low-cost agro-waste and 83.47% of the total sugar conversion was obtained. This study shows that Thermoanaerobacter sp. DBT-IOC-X2 could utilize diluted PRSH efficiently to improve the overall cost-effectiveness of biomass processing to bioethanol.