This study is aimed at developing a two-step process (fermentation plus enzymatic hydrolysis) for protease and peptone production, using a bioethanol industry by-product-com distiller's dried grains with solubles (CDDGS)-as the sole carbon/nitrogen and protein source, respectively. Bacillus licheniformis was used for protease production. CDDGS concentration is the main parameter controlling protease generation, only low substrate concentration (below 2%, w/v) induces sporulation followed by enzyme excretion. The enzymatic peptone production process was implemented using the B. licheniformis fermentation broth (proteases) generated in the first step as hydrolytic tool, and CDDGS as a protein source. The protein present in CDDGS is solubilized yielding a peptone (protein concentration >80%), mainly composed of peptides and oligopeptides, soluble at practically all pH values. Both products, proteases and peptones, could be of great potential in industrial processes and in nutrition and food science. (C) 2007 Elsevier Ltd. All rights reserved.