Paper mill sludge is a waste material generated from the pulping and paper making process. High-glucan/low-lignin content, well-dispersed structure and low cost make the Kraft paper mill sludge a promising feedstock for bioconversion into value-added products. However, it has high ash content which is harmful to cell growth and other cellular reactions. In this study, the sludges from Kraft paper mill was partially de-ashed and treated additionally with sulfuric acid and sodium hydroxide in sequence to further reduce the ash content. It was then used as the substrate for cellulase production and bioconversion to ethanol. The cellulase enzyme produced from de-ashed sludge exhibited cellulase activity as high as 8 FPU/mL. The cellulase was further characterized in terms of specific activity, and activities of three major components in cellulase and xylanase. It was also found that the particle size has a significant effect on cellulase production. It appears that increased surface area of the substrate enhances availability of the solid substrate and oxygen mass transfer, consequently the cell growth as well as cellulase production. The efficiency of the cellulase enzyme was further evaluated by enzymatic hydrolysis and simultaneous saccharification and fermentation (SSF) using untreated primary sludge as the feedstock. Ethanol yield of 71% of theoretical maximum and 2.8% (w/v) ethanol concentration were achieved in straight batch SSF experiment using Sacharomyces cerevisiae. The ethanol concentration was increased to 6.0% (w/v) when the SSF was operated in fed-batch mode. The results are comparable to those of the SSF using commercial cellulases.