Abstract: A method for production of fuel pellets from a biological material, preferably saw dust, wood or similar, where the method comprises the following steps: supplying the material to a drying step (1) and dry the material to a relative humidity from 40-65 weight-percent to 30-45 weight-percent; supplying the material from the dryer step (1), optionally via an intermediate storage step (2), to a reactor step (3, 3?) and heat the material to 200-300° C. by supply of steam; keeping the material in the reactor at the achieved temperature in sufficient time to soften the material; reducing the pressure of the reactor step (3,3?) in at least two steps, in order to defibrate the material and release of lignin, and supply the material from the reactor step (3,3?) to an additional drying step (5), optionally via an intermediate storage step (4), and optionally pelletizing of the material.