Hydrothermal carbonization can be defined as combined dehydration and decarboxy lation of a fuel to raise its carbon content with the aim of achieving a higher calorific value. It is realized by applying elevated temperatures (180–220°C) to biomass in a suspension with water under saturated pressure for several hours. With this conversion process, a lignite-like, easy to handle fuel with well-defined properties can be created from biomass residues, even with high moisture content. Thus it may contribute to a wider application of biomass for energetic purposes. Although hydrothermal carbonization has been known for nearly a century, it has received little attention in current biomass conversion research. This review summarizes knowledge about the chemical nature of this process from a process design point of view. Reaction mechanisms of hydrolysis, dehydration, decarboxylation, aromatization, and condensation polymerization are discussed and evaluated to describe important operational parameters qualitatively. The results are used to derive fundamental process design improvements. Copyright © 2010 Society of Chemical Industry and John Wiley & Sons, Ltd