In the current study, we compared the production of extracellular lignocellulose degrading enzymes and bioethanol from the spent mushroom substrate (SMS) of Calocybe indica and Volvariella volvacea. From SMS at different stages of the mushroom development cycle, ligninolytic and hydrolytic enzymes were analysed. The activities of lignin-degrading enzymes, including lignin peroxidase (LiP), laccase, and manganese peroxidase (MnP) were maximal in the spawn run and primordial stages, while hydrolytic enzymes including xylanase, cellobiohydrolase (CBH), and carboxymethyl cellulase (CMCase) showed higher activity during fruiting bodies development and at the end of the mushroom growth cycle. SMS of V. volvacea showed relatively lower ligninase activity than the SMS of C. indica, but had the maximum activity of hydrolytic enzymes. The enzyme was precipitated with acetone and further purified with the DEAE cellulose column. The maximum yield of reducing sugars was obtained after hydrolysis of NaOH (0.5 M) pretreated SMS with a cocktail of partially purified enzymes (50% v/v). After enzymatic hydrolysis, the total reducing sugars were 18.68 ± 0.34 g/l (SMS of C. indica) and 20.02 ± 0.87 g/l (SMS of V. volvacea). We observed the highest fermentation efficiency and ethanol productivity (54.25%, 0.12 g/l h) obtained from SMS hydrolysate of V. volvacea after 48 h at 30 ± 2 °C, using co-culture of Saccharomyces cerevisiae MTCC 11,815 and Pachysolen tannophilus MTCC 1077.