Lignin modified phenol formaldehyde wood adhesives have been prepared by replacing phenol with the groundnut shell lignin (GNSL) at varying weight percentages. The optimization of weight percent incorporation of GNSL was carried out in respect to mechanical properties. It was found that a maximum of up to 50 wt.% of phenol in the phenol formaldehyde (PF) adhesive can be substituted by GNSL to obtain lignin substituted phenol formaldehyde (LSPF) adhesive with improved adhesive and shear strength in comparison with PF adhesive. The adhesive composition having 50 wt.% of phenol substituted by GNSL, termed as LSPF50 showed highest adhesive strength. LSPF50 and PF were further characterized by IR, DSC and TGA. Gel time measured and DSC showed higher rate of curing / hardening in LSPF50 than in PF. Thermogravimetric analysis (TGA) Suggests C stage curing of LSPF50 adhesive at about 150/160 degrees C while for PF at about 160/185 degrees C.