Thermo-alkaline xylanases are widely applied in paper pulping industry. In this study, a novel thermostable and alkaline tolerant GH10 xylanase (Xyn30Y5) gene from alkaliphilic Bacillus sp. 30Y5 was cloned and the surface-layer homology (SLH) domains truncated enzyme (Xyn30Y5-SLH) was expressed in Escherichia coli. The purified Xyn30Y5-SLH was most active at 70 °C and pH 7.0 and showed the highest specific activity of 349.4 U mg−1. It retained more than 90% activity between pH 6.0 to 9.5 and was stable at pH 6.0–10.0. To improve the activity, 47 mutants were designed based on eight rational strategies and 21 mutants showed higher activity. By combinatorial mutagenesis, the best mutant 3B demonstrated specific activity of 1016.8 U mg−1 with a doubled catalytic efficiency (kcat/Km) and RA601/2h value, accompanied by optimal pH shift to 8.0. The molecular dynamics simulation analysis indicated that the increase of flexibility of α5 helix and loop7 located near to the catalytic residues is likely responsible for its activity improvement. And the decrease of flexibility of the most unstable regions is vital for the thermostablity improvement. This work provided not only a novel thermostable and alkaline tolerant xylanase with industrial application potential but also an effective mutagenesis strategy for xylanase activity improvement.