Bagasse, an industrial agro waste is treated with alkali initially to remove hemicelluloses fraction followed by treatment with sodium chlorite solution varying the treatment time. The novelty of the work lies in the bleaching with chlorite treatment in alkaline medium. The treated bagasse fiber was characterized by Fourier transform infrared spectroscopy (FTIR), X-ray diffraction (XRD), particle size analysis by dynamic light scattering technique (DLS), optical microscope, scanning electron microscope (SEM), atomic force microscope (AFM), UV spectroscope, and thermogravimetric analysis (TGA). It was found that during alkali treatment, a lattice transformation from cellulose I to cellulose II took place. Chlorite treatment removed lignin initially, and then with increasing time, the amorphous portion of cellulose is removed, rendering high crystallinity in the fiber. All the changes have been accounted by evaluation of LOI (lateral order of index), TCI (total crystallinity index), and HBI (hydrogen bond intensity) from FTIR study. XRD study also revealed the same fact. AFM study also supported the same fact indicating generation of sharp crystal and rough surface. Morphological study of treated and untreated bagasse fiber also exhibited fibrillation of fiber. Radius of hydration as estimated by DLS analysis followed a decreasing trend with increase in chlorite treatment time. The loss of transparency in cellulose fiber has been exposed by UV spectra analysis. TGA study showed that thermal stability has been increased with chlorite treatment. Such alkali treatment along with sodium chlorite for cellulose extraction from bagasse has not been performed by earlier investigators. Extracted cellulose fiber will be a very suitable reinforcing agent due to highly fibrillated morphology.