Chemical modification strategies to improve the mechanical properties of lignin-based polyurethanes are presented. We hypothesized that treatment of lignin with Lewis acids would increase the concentration of hydroxyl groups available to react with diisocyanate monomers. Under the conditions used, hydrogen bromide-catalyzed modification resulted in a 28% increase in hydroxyl group content. Associated increases in hydrophilicity of solvent-cast thin films were also recorded as evidenced by decreases in water contact angle. Polyurethanes were then prepared by first preparing a prepolymer based on mixtures of toluene-2,4-diisocyanate (TDI) and unmodified or modified lignin, then polymerization was completed through addition of polyethylene glycol (PEG), resulting in mass ratios of TDI:lignin:PEG of 43:17:40 in the compositions investigated here. The mixture of TDI and unmodified lignin resulted in a lignin powder at the bottom of the liquid, suggesting it did not react directly with TDI. However, a homogeneous solution resulted when TDI and the hydrogen bromide-treated lignin were mixed, suggesting demethylation indeed increased reactivity and resulted in better integration of lignin into the urethane network. Significant improvements in mechanical properties of modified lignin polyurethanes were observed, with a 6.5-fold increase in modulus, which were attributed to better integration of the modified lignin into the covalent polymer network due to the higher concentration of hydroxyl groups. This research indicates that chemical modification strategies can lead to significant improvements in the properties of lignin-based polymeric materials using a higher fraction of an inexpensive lignin monomer from renewable resources and a lower fraction an expensive, petroleum-derived isocyanate monomer to achieve the required material properties.