Lyocell, commercially supplied by Lenzing Fibers under the trade name Tencel are used in the manufacture of dry-laid and wet-laid nonwovens as well as speciality papers for high performance. The fibrillation behaviour of Tencel fiber on different SEL condition was studied in this paper. The results show that Tencel fiber can be well fibrilated with long fiber length after refining at 0.4-0.8Ws/m SEL. The distribution of microfibers diameter are mostly between 200nm to 2000nm. The fibrilated fibers were applied in alkaline Zn/MnO2 battery separator. The properties of the resulting papers in comparison to the commercial separator are much better especially in prorosity and pore size.