Provided is a method for producing xylonic acid from xylose with a recombinant fungal strain that is genetically modified to express a xylose dehydrogenase gene, which is able to convert xylose to xylonolactone, which is spontaneously or enzymatically hydrolyzed to xylonic acid. The xylonic acid is excreted outside the host cell. Xylonate production may be coupled with xylitol production. Alternatively, if xylitol production is not desired, its production is reduced by removing the aldose reductase (or specific xylose reductase) enzyme, which converts xylose to xylitol. Expression of a heterologous lactonase encoding gene may result in higher acid concentrations. The method is suitable for producing xylonic acid from a hemicellulose hydrolysate such as hydrolyzed lignocellulosic plant biomass.