Lignocellulose degradation is important when applying biodrying treatment to sewage sludge intended for land use. This study investigated the lignocellulose degradation in the biodrying of sewage sludge and sawdust. The experiment analyzed lignocellulose content, lignocellulase activity, humic substances, and fungal communities. After biodrying, lignin, cellulose, and hemicellulose degradation rates were 48.4, 38.8, and 45.0%, respectively. Carboxymethyl cellulase, lignin peroxidase, and xylanase played key roles. During the thermophilic phase, more than 80% of the microorganisms in the sample contributing to lignocellulose degradation were Ascomycota. The lignocellulose degradation and a rate of increase in humic acid/fulvic acid of 380% benefit land use of biodrying product.