Cutaneotrichosporon oleaginosus is a highly efficient single cell oil producer, which in addition to hexoses and pentoses can metabolize organic acids. In this study, fed-batch cultivation with consumption-based acetic acid feeding was further developed to integrate the transformation of an industrial paper mill lignocellulosic hydrolysate (LCH) into yeast oil. Employing pentose-rich LCH as a carbon source instead of glucose significantly improved both biomass formation and lipid titer, reaching 55.73 ± 5.20 g/L and 42.1 ± 1.7 g/L (75.5% lipid per biomass), respectively. This hybrid approach of using acetic acid and LCH in one process was further optimized to increase the share of bioavailable carbon from LCH using a combination of consumption-based and continuous feeding. Finally, the techno-economic analysis revealed a 26% cost reduction when using LCH instead of commercial glucose. In summary, we developed a process leading to a holistic approach to valorizing a pentose-rich industrial waste by converting it into oleochemicals.