AbstractEffective liquid-liquid fractionation methods of the heavy bio-oil have been pursued to improve the key biomass functionalities. Here, fast-pyrolysis bio-oil derived from eucalypt wood was fractionated in cold water to separate insoluble- and water-soluble fractions. We focus on the water-soluble fraction, a promising renewable source of chemicals with potential antimicrobial approaches. Fast-pyrolysis bio-oil was fractionated in three oil-to-water ratios, 1:100, 1:50, and 1:35, separating the pyrolytic lignin and producing water-soluble fractions as byproducts. The water-soluble fractions were analytically investigated through physicochemical properties, chemical composition by chromatography, phenolic content, antioxidant activity, antimicrobial activity, and their storage stability. Higher water content in the pyrolytic lignin separation resulted in higher yield and solids concentration in the water-soluble fractions, with the presence of high value-added chemicals, such as catechol, vanillin, and levoglucosan. Levoglucosan was the dominant chemical identified in the water-soluble fractions, notably for the 1:50 oil-to-water ratio. These remarkable chemicals and a high phenolic content contribute to both high antioxidant and antimicrobial activities. Despite the low concentration, all water-soluble fractions exhibited intense inhibition ofTrametes versicolorandGloeophyllum trabeumfungi. The fraction 1:50 completely inhibited the fungal activity. Both 1:100 and 1:50 fractions showed antibacterial activity forEscherichia coliandStaphylococcus aureus. Regardless of the oil-to-water ratio, water-soluble fractions exhibited a relative storage chemical stability under accelerated aging conditions for 43 days. Therefore, water-soluble fractions of fast-pyrolysis bio-oil derived from a simple method to separate pyrolytic lignin are functional materials with remarkable properties and, hence, upgrading bio-oil based on their functionalities.