The imbalance between the energy demand and supply and environmental pollution makes it necessary to develop renewable energy as an alternative energy source. Hydrothermal liquefaction (HTL) of biomass is a promising method to produce a crude bio-oil (biocrude), and upgrading biocrude by catalytic hydrogenation can improve its quality. This article systematically describes chemical reactions in biomass HTL and the catalytic hydrogenation upgrading of the obtained biocrude. We comprehensively analyze the effects of operating parameters on chemical reactions in HTL and catalytic hydrogenation upgrading processes, such as reaction temperature, residence time, and catalyst type. We also propose the future development directions of biomass HTL and biocrude upgrading. This information can help in selecting the reaction routes and reaction parameters such that the yield and quality of bio-oil can be improved.