Lignin is a promising candidate for the replacement of fossil-based materials, due to its natural abundance and aromatic structure. This same structure poses major challenges to lignin's exploitation for material development. The harsh conditions generally needed for its isolation make it susceptible to uncontrollable side reactions that limit its further upgrading and/or functionalization. Here, by using aldehyde-assisted fractionation (AAF), we have extracted lignin while avoiding condensation reactions and, at the same time, introduced new functional groups on the lignin in a single step. By using a multifunctional aldehyde such as terephthalic aldehyde (TALD), we used acetal functionalization to prevent the dehydration and condensation of lignin's β-O-4 linkage and introduced an aldehyde on the lignin backbone. By tuning the amount of TALD during the extraction process, we were also able to precisely control the degree of chemical functionalization. We then exploited the reactivity of the newly functionalized biopolymer to increase phenolation reactions yields in both acid and basic environment, in order to provide better lignins for incorporation in phenol formaldehyde resins. These TALD-lignins were more reactive than Kraft lignin or mild organosolv lignin extracted in an acid solution of 80% ethanol in water, which could facilitate their use for developing more sustainable resins and materials.