The authors have recently proposed a novel method that not only dewaters but upgrades low-grade carbonaceous resources such as biomass, peat, lignite, and sub-bituminous coals. The method comprises a treatment of the raw materials in non-polar solvent, such as 1-methylnaphthalene, at temperatures below 350℃, and subsequent separation of the upgraded samples into extract, residue, and gaseous product consisting of CO_2 and a negligible amount of hydrocarbon gases at the treatment temperature. The extract is further separated into solvent-soluble fraction, Soluble, and solvent-insoluble fraction, Deposit, at room temperature. The method can produce a large amount of Soluble which consists of ashless, carbon-rich, low-molecular-weight compounds. In this study the upgrading mechanism of biomass in the proposed method was examined. It was clarified that intermolecular dehydration reactions of cellulose which cause polymerization were significantly suppressed in the presence of solvent and then bond cleavage reactions proceeded in parallel with intramolecular dehydration reactions, resulting in the formation of low-molecular-weight compounds with more unsaturated double bonds.