A set of fifteen thermophilic fungi were isolated from various lignocellulosic and soil samples, among which Thermomyces lanuginosus VAPS24 showed highest xylanase activity. Xylanase production was optimized using various hybrid statistical tools and validated by batch fermentation using a 5 L bioreactor. Highest values of 130.98 U mL(-1) and 115.37 U mL(-1) xylanase production of was recorded in shake flask and fermenter, respectively. The xylanase from T. lanuginosus VAPS24 was purified by acetone precipitation followed by ultrafiltration, which resulted in five-fold (5.92) purification. Metal ions such as Hg2+, Fe2+, Cu2+ and reagents such as PEG-2000 and EDTA were inhibitory, whereas Zn2+, Na+, K+ and beta-mercaptoethanol behaved as activators for xylanase activity. Thermostability of xylanase at 80 degrees C for 60 min, was enhanced by 1.52, 1.43 and 1.26 folds through the supplementation of polyols such as sorbitol, mannitol and glycerol, respectively. The agar-agar entrapment of xylanase increased its residual activity to 69.87%, as compared to 42.7% with free enzyme at 80 degrees C after 60 min. Our study provides a novel method of enhancing thermostability of xylanase from Thermomyces ianuginosus VAPS24, by addition of polyols or agar-agar entrapment, thereby facilitating various industrial applications.