Background Integrated management of hemicellulosic fraction and its economical transformation to value-added products is the key driver towards sustainable lignocellulosic biorefineries. In this aspect, microbial cell factories are harnessed for the sustainable production of commercially viable biochemicals by valorising C5 and C6 sugars generated from agro-industrial waste. However, in the terrestrial ecosystem, microbial systems can efficiently consume glucose. On the contrary, pentose sugars are less preferred carbon source as most of the microbes lack metabolic pathway for their utilization. The effective utilization of both pentose and hexose sugars is key for economical biorefinery. Results Bioprospecting the food waste and selective enrichment on xylose-rich medium led to screening and isolation of yeast which was phylogenetically identified as Pichia fermentans. The newly isolated xylose assimilating yeast was explored for xylitol production. The wild type strain robustly grew on xylose and produced xylitol with > 40\% conversion yield. Chemical mutagenesis of isolated yeast with ethyl methanesulphonate (EMS) yielded seven mutants. The mutant obtained after 15 min EMS exposure, exhibited best xylose bioconversion efficiency. This mutant under shake flask conditions produced maximum xylitol titer and yield of 34.0 g/L and 0.68 g/g, respectively. However, under the same conditions, the control wild type strain accumulated 27.0 g/L xylitol with a conversion yield of 0.45 g/g. Improved performance of the mutant was attributed to 34.6\% activity enhancement in xylose reductase with simultaneous reduction of xylitol dehydrogenase activity by 22.9\%. Later, the culture medium was optimized using statistical design and validated at shake flask and bioreactor level. Bioreactor studies affirmed the competence of the mutant for xylitol accumulation. The xylitol titer and yield obtained with pure xylose were 98.9 g/L and 0.67 g/g, respectively. In comparison, xylitol produced using non-detoxified xylose rich pre-hydrolysate from sugarcane bagasse was 79.0 g/L with an overall yield of 0.54 g/g. Conclusion This study demonstrates the potential of newly isolated P. fermentans in successfully valorising the hemicellulosic fraction for the sustainable xylitol production.