We optimized the solvolysis step in methanol for two-step lignin-first upgrading of woody biomass. Birchwood was first converted via sulfuric acid methanolysis to cellulose pulp and a lignin oil intermediate, which comprises a mixture of lignin oligomers and C5 sugars in the methanol solvent. The impact of reaction temperature (140–200 °C), acid loading (0.24–0.81 wt%, dry biomass), methanol/biomass ratio (2.3/1–15.8/1 w/w) and reaction time (2 h and 0.5 h) was investigated. At high biomass loadings (ratio < 6.3/1 w/w), operation at elevated pressure facilitates delignification by keeping methanol in the liquid phase. A high degree of delignification goes together to a large extent with C5 sugar release, mostly in the form of methyl xylosides. Gel permeation chromatography and heteronuclear single quantum coherence NMR of lignin fractions obtained at high acid (0.81 wt%) and low biomass (15.8/1 w/w) loading revealed extensive cleavage of β-O-4′ bonds during acidolysis at 180 °C for 2 h. At an optimized methanol/biomass ratio of 2.3/1 w/w and acid loading (0.24 wt%), more β-O-4′ bonds could be preserved, i.e., about 33% after 2 h and 47% after 0.5 h. The high reactivity of the extracted lignin fragments was confirmed by a second hydrogenolysis step. Reductive treatment with Pd/C under mild conditions led to disappearance of ether linkages and molecular weight reduction in the hydrotreated lignin oil.