Conventional dehairing methods in the traditional leather-making processes, consume large amounts of toxic chemicals and produce a toxic sludge/effluent, posing disposal challenges and consequently environmental pollution. The by-products of leather processing such as hair and fat, contain toxic chemicals. In this study, crude alkaline protease from <i>bacillus cereus strain 1-p, </i>was used to dehair sheepskin with up to 99.00% recovery of valuable wool and fat. The optimum temperature and pH for wool removal were found to be 30 <sup>°</sup>C and 11, respectively. The recovered wool was enzymatically hydrolyzed to obtain wool hydrolysate powder (48.1% yield). FTIR spectra of the wool hydrolysate showed the presence of amide A, I, and II absorption bands. Further, the amino acid analysis, revealed the presence of 15 amino acids, with glutamic acid (19.65 mole %), glycine (12.72 mole %), and leucine (9.42 mole %) being the most abundant. Fat was trans-esterified using methanol, in the presence of tert-butanol, and the resultant fatty acid methyl esters characterization was done using gas chromatography/mass spectrometry (GC/MS) analysis. GC/MS analysis showed the presence of 60 methyl esters corresponding to 60 fatty acids. The most abundant fatty acid was 9-octadecenoic (oleic) acid (41.64%), followed by hexa-decanoic (palmitic) acid (22.50%), and tetra-decanoic (myristic) acid (4.21%). Thermo-gravimetric analysis of the wool hydrolysate showed that it had good thermal stability. It is shown that crude alkaline protease extracted from <i>bacillus cereus strain 1-p</i> can completely eliminate the use of toxic sodium sulfide and lime in dehairing of skins/hide in tanneries, eliminating environmental pollution. Furthermore, the recovery of fat and wool using an eco-friendly enzymatic dehairing process can significantly reduce the pollution load in the effluent. The recovered wool and fats can be applied in the production of wool hydrolysate, which is high in protein content, amino acids and biodiesel.