Lignin is a promising candidate for substituting fossil materials because of its natural abundance and aromatic structure. The same structure poses major challenges for the use of lignin for material development. The harsh conditions generally required for its isolation make it prone to uncontrollable side reactions that limit its further upgrading and / or functionalization. Here we have extracted lignin with the help of aldehyde-assisted fractionation (AAF) avoiding condensation reactions and at the same time introduced new functional groups on the lignin in a single step. Using a multifunctional aldehyde such as terephthalic aldehyde (TALD), we used acetal functionalization to prevent dehydration and condensation of the β-O-4 bond of lignin, and introduced an aldehyde into the lignin backbone. By adjusting the amount of TALD during the extraction process, we were also able to precisely control the degree of chemical functionalization. We then used the reactivity of the newly functionalized biopolymer to increase the yields of phenolation reactions in both acidic and basic environments to provide better lignins for incorporation into phenol-formaldehyde resins. These TALD lignins were more reactive than Kraft lignin or mild Organosolv lignin extracted in an acidic solution of 80% ethanol in water, which could facilitate their use to develop more sustainable resins and materials.