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  Aims of the Study: The aim of this study was to determine the amount of lignin degradation and biodegradation of organic matter and change of biomass under compost and vermicomposting of sewage sludge. Materials & Methods: Sawdust was added to sewage sludge at 1:3 weight bases to Carbon to Nitrogen ratio of 25:1 for composting or vermicomposting. Lignin and volatile solids were determined at different periods, of 0, 10, 30, 40 and 60 days of composting or vermicomposting period to determine the biodegradation of lignocellulose to lignin. Results were expressed as mean of two replicates and the comparisons among means were made using the least significant difference test calculated (p <0.05). Results: After 60 days of experiment period, the initial lignin increased from 3.46% to 4.48% for compost and 3.46% to 5.27% for vermicompost. Biodegradation of lignocellulose was very slow in compost and vermicompost processes. Vermicomposting is a much faster process than compost to convert lignocellulose to lignin (p <0.05). Conclusions: The organic matter losses in sewage sludge composting and vermicomposting are due to the degradation of the lignin fractions. By increasing compost age, the amount of volatile solids will decrease.