Bacillus circulans AB 16 isolated from a garbage dump produced appreciable quantities (19.28 IU/ml) of extracellular thermophilic xylanase, but negligible quantities of cellulase, when grown on 0.3% xylan. The optimum pH for the enzyme was 6.0-7.0, but it was stable over a wide range of pH (5.0-9.0). The optimum temperature was 80 degrees C. The organism produced 20.6 IU/ml of xylanase in shake flask on rice straw, an inexpensive lignocellulosic biomass. Glucose, fructose, xylose and other sugars induced enzyme levels only in the range 0.82-2.52 IU/ml. The crude enzyme produced on rice straw showed good thermal and pH stability, retaining 67% activity after 1 h at 70 degrees C, pH 9 and 84.5% activity after 2 h at 65 degrees C, pH 9. The enzyme had a half-life of 24 h at 70 degrees C, pH 7. When the xylanase from B. circulans AB 16 was used in the prebleaching of eucalyptus Kraft pulp the amount of chlorine was reduced by 20% without any decrease in brightness. The viscosity of xylanase-treated pulp was 9.5-9.7 cp, whereas that of the pulp treated exclusively with chlorine was 9.2 cp.