The development of technologies for utilizing biomass has attracted attention because biomass can be produced sustainably worldwide. Biomass‐derived 2‐methyltetrahydrofuran (MTHF), which is a promising alternative to gasoline, has great market potential and a growing demand. However, in conventional biomass conversion processes, the minimum selling price (MSP) of biochemicals is not economically acceptable. Co‐production of biochemicals can increase the economics of biomass utilization. Herein, we developed a process for co‐producing MTHF and 1,4‐pentanediol (1,4‐PDO) from lignocellulosic biomass. After biomass fractionation, cellulose and hemicellulose were converted to levulinic acid (LA), and lignin was used for heat and electricity generation. LA was then converted to γ‐valerolactone (GVL). As a platform material for co‐production, GVL was converted into MTHF and 1,4‐PDO in each subsystem. The split ratio of GVL was controlled to efficiently produce MTHF and 1,4‐PDO according to market conditions. Additionally, we performed a techno‐economic and life‐cycle assessment (TEA and LCA, respectively) for the developed process. The MSP of MTHF was calculated based on the TEA results, and the environmental impacts were quantitatively calculated based on the LCA results. We performed heat integration using pinch analysis and then reduced the energy requirement of the proposed process. The key cost drivers and environmental factors of the proposed process were identified via sensitivity analyses. Consequently, during the processing of 2000 ton/day of corn stover (raw material of lignocellulose), the MSP of MTHF was calculated as $2.64/GGE (gasoline equivalent), and representative environmental impacts such as climate change and fossil depletion were calculated as −0.296 kg CO2 eq and − 0.056 kg oil eq, respectively. As a result, we can increase the economics of commercial production of MTHF and 1,4‐PDO with environmental sustainability. The proposed process can serve as a potential solution to the growing demand for the need for more sustainable biomass utilization. [ABSTRACT FROM AUTHOR]