The olive oil extraction process yields liquid waste byproduct known as olive mill wastewater (OMW), which presents a major environmental problem, if not treated before dissipation. The large amounts of OMW generated, combined with its high polluting power as well as its high chemical oxygen demand (COD) concentrations, represent the main difficulties in finding a solution for the management of this kind of wastewater. However, it could be upgraded by removing or reducing its phenolic compounds and using its carbohydrate fraction to produce biofuels. Phenolic compounds can be degraded by a few microorganizms, such as white-rot fungi, which produce a variety of enzymes that are capable of oxidizing phenols. The capability of Pleurotus sajor-caju to degrade phenols of OMW preconditioned by different treatments, namely, thermally processing (at 100 °C) diluted and undiluted OMW and thermally processing pretreated OMW with hydrogen peroxide, was investigated in this work. Results showed that P. sajor-caju removed phenolic compounds from OMW cultures, under all different conditions examined. The degradation of phenols reached up to 68% for the thermally processed OMW, 50% for the diluted OMW, 53% for the thermally processed OMW treated with hydrogen peroxide, and 58% for the thermally processed undiluted OMW. The impact of such biological conversion upon lowering the phenols content of OMW was tested by yeast fermentation of the product to produce ethanol because yeast cells are very sensitive to a high phenol concentration. Ethanol production was enhanced by the pretreatment of OMW with P. sajor-caju. The maximum ethanol production of 14.2 g/L was obtained after 48 h of yeast fermentation using 50% diluted OMW that was thermally processed and pretreated with P. sajor-caju. According to the results obtained, bioconverted OMW by P. sajor-caju is a promising substrate for the bioethanol production process, with additional benefits of its use with regard to environmental and economical aspects.