Hot spring bacteria are found a novel source of highly active xylanase enzyme with significant activity at high temperature. Among bacteria, Paenibacillus sp. N-1 isolated from hot water spring of Manikaran, H.P., India showed highest 24.60 IU.ml(-1) of cellulase-free xylanase on Reese medium. Growth conditions including medium, incubation time, pH, temperature, inoculum size, aminoacids, carbon sources, nitrogen sources and additives that affect the xylanase production by Paenibacillus sp.N-1 were studied sequentially using the classical "change-one factor at a time" method. The optimal cultivation conditions predicated from canonical analysis of this model were achieved by using basal salt medium on 3rd day, pH 9.0, temperature 50 degrees C with inoculum size of 12.5%, phenylalanine as aminoacid, xylose as carbon source, (NH4)(2)HPO4 as nitrogen source and Tween 20 as detergent added with an approximate yield of 52.30 IU.ml(-1) escalating the over level of xylanase production by 113.38%. A rare combination of all characters i.e. thermoalkalophilic nature and high units of cellulase-free xylanase produced from a new Paenibacillus sp. N-1 make it of special industrial interest.