It is well known that simultaneous saccharification and co-fermentation (SSCF) reduces cellulosic ethanol production cost compared to separate hydrolysis and fermentation (SHF). However, the traditional SSCF process of converting Ammonia Fiber Expansion (AFEX) pretreated switchgrass to ethanol using both commercial enzymes and Saccharomyces cerevisiae 424A(LNH-ST) gave reduced ethanol yield due to lower xylose consumption. To overcome this problem we have developed a two-step SSCF process, in which xylan was hydrolyzed and fermented first followed by the hydrolysis and fermentation of glucan. Important parameters, such as temperature, cellulases loading during xylan hydrolysis and fermentation, initial OD(600) for inoculation of S. cerevisiae 424A(LNH-ST), and pH, were studied for best performance. Compared with traditional SSCF, the two-step SSCF showed higher xylose consumption and higher ethanol yield. The sugar conversion was also enhanced from 70% by enzymatic hydrolysis to 82% by two-step SSCF. One important finding is that the residue from enzymatic hydrolysis plays a significant role in reducing xylose consumption and ethanol metabolic yield during SSCF.