Fermentation of shrimp shell in jaggery broth using Bacillus subtilis for the production of chitin and chitosan was investigated. It was found that B. subtilis produced sufficient quantities of acid to remove the minerals from the shell and to prevent spoilage organisms. The protease enzyme in Bacillus species was responsible for the deprotenisation of the shell. The pH, proteolytic activity, extent of demineralization and deprotenisation were studied during fermentation. About 84% of the protein and 72% of the minerals were removed from the shrimp shell after fermentation. Mild acid and alkali treatments were given to produce characteristic chitin and their concentrations were standardized. Chitin was converted to chitosan by N-deacetylation and the properties of chitin and chitosan were studied. FTIR spectral analysis of chitin and chitosan prepared by the process was carried out and compared with spectra of commercially available samples.