Production of cellulosic ethanol was investigated in this study. The wood sawdust hasrnlignocelluloses content, which make it suitable as fermentable sugars, when hydrolyzed. Therndried sawdust with uniform particle size was hydrolyzed with sulfuric acid for breaking the bondrnthat binds sugar monomers together. The black residue or lignin was removed and the reducedrnsugars were neutralized for catalyst activity in the fermentation process. Four experimentalrnparameters were investigated during hydrolysis. They are particle size (1-3mm), acidrnconcentration (3-7%), temperature (90-110oC) and time (120-240 minutes). The total reducedrnsugars content of hydrolyzed solutions were analyzed using phenol sulfuric acid method. Thernresult of stastical analysis showed a maximum sugar content of 72.51% (w/w) during thernhydrolysis of 10% (w/v) wood sawdust of 2mm particle size at 5% (v/v) sulfuric acidrnconcentration at 100oC and 180 minutes. The minimum yield of 41.24% (w/w) was achieved atrn1mm particle size, 3% (v/v) sulfuric acid concentration, 90oC and 120 minutes. The reducedrnsugars were fermented using Saccharomyces cerevisiae in anaerobic condition and the residualrnsolutions were distilled every 150 minutes by rotary evaporator. The ethanol concentrationsrnwere measured by Alcoholmeter. And maximum and minimum ethanol concentrations ofrn73.10% (v/v) and 35.20% (v/v) with 90% (0.46 g/g) of the theoretical conversion (0.51g/g) in 72rnhours were achieved respectively. Response surface methodology (RSM) employing the centralrncomposite design (CCD) was used to optimize the total reduced sugar using acid hydrolysis. Thernoptimum result was obtained at 1.72mm particle size, 4.21% (v/v) acid concentration, 102.46oCrnand 156.60 minutes. The total reduced sugar yield of 67.56% (w/w) was achieved under thesernconditions. The rough feasibility analysis evaluation indicates that, this project is beneficial. Therncost estimation studies provide the rate of return on investment as 52.4%. The payback periodrnshows the return of the total investment cost in 3 years with the net present value of 22.73rnmillion Birr.