Chemical modification of sugarcane bagasse fiber was achieved by mercerization reaction and esterification reaction with anhydride acetic vapor. This is a new acetylation procedure. The results show that the fiber length and diameter are reduced after the reactions. Fourier transform infrared spectroscopy (FT-IR) studies produced clear evidence of the partial acetylation reaction. Optical microscopy revealed fibrillation in the acetylated fiber attributed to hemicellulose dissolution. The thermal stability measured by thermogravimetric analysis (TGA) and differential scanning calorimetry (DSC) increased after acetylation and decreased after mercerization. The higher thermal stability of the acetylated fiber as compared with modified fibers in liquid medium was attributed to the small quantity of water and acetic acid present for the reaction in vapor phase. The lesser tensile strength of the acetylated fiber was due to fibrillation. The porous structure obtained favors migration of the polymer chains into the fiber acetylated, and thus it should enhance the polymer–fiber adhesion in polymer composites.