Simultaneous hydrothermal degradation and extraction at. around 350 degrees C using flowing solvent as a reaction/extraction medium were proposed for upgrading brown coal, more specifically, for converting brown coal into several fractions having different molecular weight and chemical structure under mild conditions. When an Australian brown coal, Loy Yang coal, was treated by water at 350 degrees C under 18 MPa, the coal was separated into four fractions: gaseous product by 8% yield, water-soluble extract at room temperature (soluble) by 23% yield, extract precipitates as solid at room temperature (deposit) by 23% yield, and residual coal (upgraded coal) by 46% yield oil daf basis. The separation was found to be realized by in situ extraction of low-molecular-weight substances released from coal macromolecular structure and/ or those generated by hydrothermal decomposition reactions at 350 degrees C. The solid products obtained, deposit and upgraded coal, were characterized in detail to examine the possibility of their effective utilization as solid fuel and chemical feed stock. The upgraded coal showed higher heating value and higher gasification reactivity than the parent coal, indicating that the upgraded coal can be a better solid fuel than the parent coal. The solid extract, deposit, was found to show thermoplasticity at less than 200 degrees C, suggesting the possibility of utilizing the deposit as a raw material of high performance carbon materials. Several variables affecting the performance of the proposed method are also examined in detail in this paper.