Oleaginous microalgae are known as promising oil producers, which accumulate high amount of lipids from various carbon substrates. This study first investigated sugarcane bagasse hydrolysate as a cheap carbon source for the production of biomass and lipid by Schizochytrium sp. The sugarcane bagasse was pretreated with alkali followed by phosphoric acid to remove lignin and enhance xylose production, respectively. The enzymatic hydrolysis of the pretreated sugarcane bagasse by cellulase was subsequently optimized. A maximum glucose yield of 95.77% was obtained at an enzyme loading of 0.3 mL/g with a hydrolysis reaction time of 48 h. The sugarcane bagasse hydrolysate containing glucose and xylose was subsequently used as a substrate for cultivating Schizochytrium sp. Results showed that sugarcane bagasse hydrolysate performed better than refined glucose for cell growth and lipid accumulation. The maximum biomass (10.45 g/L) and lipid content (45.15%) were achieved by growing Schizochytrium sp. in a medium containing 40 g/L glucose in sugarcane bagasse hydrolysate for 72 h. Sugarcane bagasse hydrolysate also resulted in higher levels of polyunsaturated fatty acid and docosahexaenoic acid than did refined glucose. This study suggests that sugarcane bagasse hydrolysate is a low-cost and effective carbon source for microalgal biomass and lipid production.