Lyocell Lyocell is a regenerated cellulose fiber. The Eucalyptus tree is the primary basis for the fiber production. Eucalyptus trees grow quickly, without irrigation and virtually any pesticides. The production of lyocell doesn’t use toxic chemicals. Compared to cotton, lyocell has the potential to use less than half as much water in production. The fabric’s breathability is also great for the planet, as it doesn’t start smelling as quickly and can be washed less frequently, saving water.