Xylanase is a key enzyme in the conversion of lignocellulosic biomass into various oligosaccharides and simpler monomeric units through the hydrolysis of hemicellulose. Rice straw is readily available around the world and is a rich source of hemicellulose. Recently, there has been growing interest in the exploitation of rice straw as a low-cost substrate for the production of hemicellulolytic enzyme, i.e., xylanase. This study aimed to optimize the nutritional components (rice straw, magnesium sulphate, and calcium chloride concentrations) and physical parameters (temperature and pH) for xylanase production with a newly isolated Aspergillus oryzae LC1 under submerged fermentation using central composite design based response surface methodology. The optimum media constituents were 1% rice straw (w/v), 1.0 g/L calcium chloride, and 0.3 g/L magnesium sulphate, and the optimum physical parameters were pH 5 and 25 °C. The statistical design showed increased xylanase production with a maximum activity of 935 ± 2.3 IU/mL. The enzyme production was 3.8-fold higher than for the un-optimized Mendel’s Stenberg Basal Salt medium (245 ± 1.9 IU/mL). The enzyme was stable over wide ranges of pH (3 to 10) and temperature (25 to 60 °C). The partially purified xylanase enzyme was used for the enzymatic hydrolysis of different lignocellulosic agro-residues.