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Microbial bioprocessing of lignocellulose to bioethanol still poses challenges in terms of substrate catabolism. A targeted evolution-based study was undertaken to determine if inter-strain microbial variability could be exploited for bioprocessing of lignocellulose to bioethanol. The microorganism studied was Fusarium oxysporum because of its capacity to both saccharify and ferment lignocellulose. Strains of F. oxysporum were isolated and assessed for their genetic variability. Using optimised solid-state straw culture conditions, experiments were conducted that compared fungal strains in terms of their growth, enzyme activities (cellulases, xylanase and alcohol dehydrogenase) and yield of bioethanol and the undesirable by-products acetic acid and xylitol. Significant inter-strain divergence was recorded in regards to the capacity of studied F. oxysporum strains to produce alcohol from untreated straw. No correlation was observed between bioethanol synthesis and either the biomass production or microbial enzyme activity. A strong correlation was observed between both acetic acid and xylitol production and bioethanol yield. The level of diversity recorded in the alcohol production capacity among closely-related microorganism means that a targeted screening of populations of selected microbial species could greatly improve bioprocessing yields, in terms of providing both new host strains and candidate genes for the bioethanol industry.