Abundance of low rank coal and increasing demand for energy provide an incentive for upgrading the low rank coal due to their high moisture and oxygen content. Various analyses were done to study the effect of the hydrothermal treatment on the physical and chemical structure of coal. Treatment of lignite coal results in a high reduction of moisture and oxygen especially at high temperature. Increasing the hydrophobicity and higher heating value of the coal are some advantages of hydrothermal treatment. Also increasing the initial pressure leads to decrease the energy required for the process and reduces the losing of volatile matter. In addition analysis of ash shows the reduction of alkali metals during the hydrothermal treatment. This should reduce slagging and fouling issues during coal combustion. This result is confirmed by analysis of extracted water.