Oxidative torrefaction of sawdust with a carrier gas containing 3-6% O(2) was investigated in a TG and a fluidized bed reactor, with the properties of the torrefied sawdust and pellets compared with traditional torrefaction without any O(2), as well as the dry raw material. It is found that the oxidative torrefaction process produced torrefied sawdust and pellets of similar properties as normally torrefied sawdust and corresponding pellets, especially on the density, energy consumption for pelletization, higher heating value and energy yield. For moisture absorption and hardness of the torrefied pellets, the oxidative torrefaction process showed slightly poor but negligible performance. Therefore, it is feasible to use oxygen laden combustion flue gases as the carrier gas for torrefaction of biomass. Besides, torrefied sawdust can be made into dense and strong pellets of high hydrophobicity at a higher die temperature than normally used in the production of traditional control pellets.