Xylooligosaccharides (XOS), a potential prebiotic exhibits important technological characteristics and interesting nutritional properties. The major fraction in XOS produced enzymatically from corncob was characterised as β‐d‐xylopyranosyl‐(1,4)‐d‐xylanopyranose (xylobiose) using 13C and 2D‐HSQC NMR. The use of this XOS as a prebiotic in idli, a cereal/legume‐based fermented cake, and its effect on texture, fermentation and sensory characteristics was investigated. Idli batter was fermented with different concentrations of XOS (0, 0.2, 0.4 and 0.6% w/v) for 4–18 h conventionally. The addition of XOS markedly increased lactic acid bacteria number (9.88 ± 0.08 log cfu g−1) which resulted in rapid reduction in pH (4.61 ± 0.03) and specific gravity after 6 h of fermentation when compared to conventional batter fermentation for 18 h without XOS (9.46 ± 0.06 log cfu g−1). Instrumental (colour and texture) and sensory evaluation indicated that the optimum conditions were 0.4% XOS and 6 h fermentation. Idlis with XOS had higher moisture content and a softer texture. Addition of XOS benefits both fermentation and idli quality.