The pretreatment of wheat straw with potassium hydroxide (KOH) at ambient temperature (20 °C) was investigated. The pretreatment effects on chemical composition and physical structures, and subsequent enzymatic hydrolysis and anaerobic digestion were evaluated. Wheat straw at 10% total solids (TS) was treated with KOH solution for 24 h at a wide range of KOH loadings from 2% to 50% (w/w dry basis). Higher KOH loading resulted in higher lignin reduction from the straw and chemical oxygen demand (COD) in the resulting black liquor. Maximum lignin reduction of 54.7% was observed at 50% KOH loading. In comparison to untreated straw, specific hydrolysis yields achieved 14.0–92.3% over the range of 2–50% KOH loading, and methane yields increased 16.7–77.5% for KOH loadings of 10–50%, respectively. Accounting for losses during pretreatment, 20% KOH loading resulted in maximum overall reducing sugar yield and methane yield and therefore is the recommended loading for pretreatment under these conditions.