A novel strategy integrating pearling, dry milling and bioconversion has been developed for oats processing.  The dry processing steps obtained a bran-rich fraction.  The remaining starch-rich fraction was subsequently fermented by Rhizopus oryzae to produce lactic acid.  The trichomes of a naked oat cultivar contained at least 126 ppm aluminium and were inhabited by at least three strains of bacteria up to a population of 380,000 unit forming units per gram on a dry basis.  The benefit of pearling was shown by its efficiency in removing all trichomes and their associated bacteria and aluminium within 5 seconds.  This significantly reduced the hazardous level of oat dry processing and increased the safety for the bran-rich fraction to be used as a functional food additive.  The extraction rate and its chemical composition of the bran-rich fraction complied with AACC's definition for oat bran.  Chemical analysis of the fractions obtained by extended pearling indicated that a pearling time interval from 20 to 50 s generated a fraction enriched with 24% aleurone cells.  Maximum lactic acid concentration of 51.7 g l^-1 was achieved when a 116.5 g l^-1 suspension of the flour-rich fraction was used as the sole nutrient source in submerged R. oryzae fermentation.  This fungus produced a range of hydrolytic enzymes for the bioconversion of oat macromolecules.  Oxygen transfer in this fermentation was identified as the most critical processing parameter for both lactic acid production and starch conversion yield.