Water extraction of slow-pyrolysis bio-oil, in order to improve its quality, was investigated in terms of different schemes and operating parameters. The water extraction separated the bio-oil into two phases: an aqueous phase and an organic water-insoluble fraction (or “pyrolytic lignin”). Properties of the pyrolytic lignin extracted with different extraction schemes and conditions were characterized and compared. The results showed that the water temperature and stirring time did not significantly affect the pyrolytic lignin’s properties. The water : bio-oil ratio, however, could remarkably reduce the pyrolytic lignin’s acidity. Given the findings, an effective time- and resource-saving extraction scheme with appropriate operating conditions could be devised. The resulted pyrolytic lignin, which was essentially the “upgraded” bio-oil, had notably lower acidity, higher heating value, and more stability than the starting bio-oil, due to the removal of alcohols, ketones, carboxylic acids, sugars, ethers, as well as reactive compounds by the water extraction.