A biochar (BC)-supported non-noble metal catalyst CoMoSxOy@BC was prepared by in situ co-pyrolysis and ex situ sulfurization, and a two-step conversion (TSC) strategy, including H-2-controlled catalytic hydroconversion (CHC) and catalytic ethanolysis without H-2 participation, was proposed and used for catalyzing degradation of Dahuangshan lignite (DL) into soluble species (SSs) in high yields. CoMoSxOy@BC with uniformly dispersed nanoparticles of metals, metal sulfides, and metal oxides plays a crucial role in the TSC. The effective activation of H-2 and ethanol over CoMoSxOy@BC facilitates cleaving bridged linkages in organic matter of DL to increase the SS yields. As a result, the total yield of SSs increased from 42.7% via non-catalytic degradation (NCD) to 70.0% via catalytic degradation (CD), while that of the petroleum ether-extractable portion (PEEP) increases from 17.5% via NCD to 27.0% via CD. In addition, according to the analysis with a gas chromatograph/mass spectrometer, alkanes, arenes, and arenols are dominant in PEEPs from step 1 (PEEPs(1)), while alkanol, arenols, and esters in PEEPs from step 2 (PEEPs(2)) are predominant. The difference in composition among the PEEPs and hydrogenated PEEPs obtained by the CHC further confirms that PEEPs(1) are more suitable as a precursor for the fuel-platform unit, while PEEPs(2) are better candidates for obtaining value-added chemicals. In other words, multiple PEEPs in high yields with different properties can be obtained by this TSC strategy, which provides a potential and promising alternative to the clean and efficient utilization of lignites.