Thermophilic, aerobic bacteria isolated from Icelandic hot springs were screened for xylanase activity. Of 97 strains tested, 14 were found to be xylanase positive. Xylanase activities up to 12 nkat/ml were produced by these strains in shake flasks on xylan medium. The xylanases of the two strains producing the highest activities (ITI 36 and ITI 283) were similar with respect to temperature and pH optima (80°C and pH 8.0). Xylanase production of strain ITI 36 was found to be induced by xylan and xylose. Xylanase activity of 24 nkat/ml was obtained with this strain in a laboratory-scale-fermentor cultivation on xylose medium. β-Xylosidase activity was also detected in the culture filtrate. The thermal half-life of ITI 36 xylanase was 24 h at 70°C. The highest production of sugars from hydrolysis of beech xylan was obtained at 70°C, although xylan depolymerization was detected even up to 90°C.