Paper recycling is expected to increase by an average of 10% annually for the next few years. Likewise, the recycled paper sludge (RPS) generated during repulping will increase accordingly. The typical RPS has an average content of 60% moisture and 50% cellulose on a dry basis. Simultaneous saccharification and fermentation (SSF) with fungal cellulase and yeast, Kluyveromyces marxianus, were used to convert cellulose fibers of RPS samples to ethanol. The cellulase loading was 8 filter paper units (FPU)/g dry RPS. About 32 and 35 g/l of ethanol were produced from 180 and 190 g/l dry materials, respectively, after 72 h of incubation. This indicates that at least 72% of cellulose in the RPS was converted into ethanol. During incubation, the thick slurry of RPS was liquefied within 24 h, resulting in the reduction of water-holding capacity (WHC) of RPS to 30-35% of the original. (C) 1997 Elsevier Science Ltd.