The chemically as well as hot water treated agrowaste sugarcane bagasse was subjected to degradation by Pleurotus citrinopileatus. The fungus degraded lignin, cellulose, hemicellulose, and carbon content of both chemically as well as hot water treated waste and produced in turn the edible and nutritious fruiting body. Biodegradation of the waste in terms of loss of lignin, cellulose and hemicellulose showed positive correlation with cellulases, xylanase, laccase and polyphenol oxidase (PPO) activity of the fungus. During mycelial growth of the fungus, lignin degradation was faster and during fructification, lignin degradation was slower than cellulose and hemicellulose. The carbon content of the sugarcane bagasse decreased while, nitrogen content increased during degradation of the waste. Hot water treated substrate supported better production of enzymatic activity and degraded more efficiently than chemically sterilized substrate. The total yield and biological efficiency of the mushroom was maximum on the hot water treated substrates. Degradation of the hot water treated sugarcane bagasse was better and faster than chemically treated substrates.