The work develops a strategy for the production of ethanol from lignocellulosic biomass. In this strategy, the cellulose and hemicellulose fractions are simultaneously converted to sugars using a γ-valerolactone (GVL) solvent containing a dilute acid catalyst. To effectively recover GVL for reuse as solvent and biomass-derived lignin for heat and power generation, separation subsystems, including a novel CO2-based extraction for the separation of sugars from GVL, lignin and humins have been designed. The sugars are co-fermented by yeast to produce ethanol. Furthermore, heat integration to reduce utility requirements is performed. It is shown that this strategy leads to high ethanol yields and the total energy requirements could be satisfied by burning the lignin. The integrated strategy using corn stover feedstock leads to a minimum selling price of $5 per gallon of gasoline equivalent, which suggests that it is a promising alternative to current biofuels production approaches.