The decarbonization of energy systems requires both clean fuel alternatives and sustainable materials for energy storage. This study explores catalytic graphitization of engineered pyrolysis bio-oil, a renewable, carbon-rich by-product of biomass conversion, to produce graphite for lithium-ion battery anodes and renewable hydrogen. Four engineered bio-oils derived from sawdust pyrolysis at 550 °C were evaluated at 1300 °C using reduced iron powder as a catalyst. Among these, heavy-phase filtered bio-oil (HFB) demonstrated superior graphitization efficiency, achieving a graphitization degree of 94.51% and generating a significant hydrogen yield of 5.25 g H<inf>2</inf>/100 g bio-oil. Compared to conventional synthetic graphite production, which relies on fossil coke and extreme temperatures (>2500 °C), this method significantly reduces energy demand and CO<inf>2</inf> emissions. A liquid–solid catalytic mechanism is proposed for the first time, enabling efficient carbon transformation and hydrogen release without the need for steam input. This work contributes to advancing circular bioeconomy strategies and highlights the role of biomass valorization in future sustainable energy systems.