The wild type filamentous fungus, Melanocarpus albomyces, produces many commercially valuable enzymes, including Xylanases and Xylan-debranching enzymes with low activity. In this paper, we report for the first time the development of M. albomyces mutants from vegetative spores. Profuse sporulation of M. albomyces was induced on Potato Carrot Agar medium. These spores, when subjected to chemical mutation, led to the isolation of the hyper-xylanase producing mutant, viz, M. albomyces IITD3A. Various parameters including number of spores, nitrogen source and C/N ratio of the medium were optimized for production of xylanase by the mutant in a shake flask culture. Under controlled pH at 7.8, the mutant produced highly active xylanase with 415 IU/mL after 36 h of growth on soluble alkaline lignocellulosic extract in a 14-L fermentor. The overall productivity of xylanase was 8-fold higher than the wild type culture with11,530 IU/L/h. The enzyme can be easily stored at $37^{circ}C$ for 50 days by addition of a small amount of the preservative - thiomersal. Also, for long term storage, a lyophilized powder form of the enzyme can be used which retained 100% of its activity for > 50 days. When assayed at pH 7.5 and temperature $55^{circ}C$, the xylanase retained 100% of its original activity, and also at pH 9.0, it retained > 50% of its activity for 2 h, which is promising for its application in the pulp and paper industry.