The algal biomass of different species of Gracilaria were collected from coasts of Orissa and Tamil Nadu, India and characterized biochemically. Among various species, G. verrucosa was found to be better in terms of total carbohydrate content (56.65%) and hence selected for further studies. The agar was extracted from algal biomass and the residual pulp was enzymatically hydrolyzed. The optimization of algal pulp hydrolysis for various parameters revealed a maximum sugar release of 75.8mg/ml with 63% saccharification yield. The fermentation of enzymatic hydrolysate of algal pulp was optimized and 8% (v/v) inoculum size, 12h inoculum age, pH 5.0 were found to be optimum parameters for maximum ethanol concentration (27.2g/L) after 12h. The process of enzymatic hydrolysis and fermentation were successfully scaled up to 2L bioreactor scale.