Lignin-modified phenolic resin has been prepared by replacing phenol with lignin at different weight percentages. The resin synthesis was optimized by varying the molar ratio of phenol to formaldehyde, the concentration of sodium hydroxide, and the reaction time by measuring parameters such as the gelation time, flow time, solids content, pH, and specific gravity. The thermal stability of lignin-modified phenolic resin was studied by DSC, TGA, and isothermal analysis, and it was found that lignin-modified phenolic resin is thermally more stable than pure phenolic resin. The adhesive strength of lignin-modified phenolic resin was determined by the lap-shear method, which showed that the lignin-modified resin retains 78% of the adhesive strength for wood-wood systems and 86% of the adhesive strength for Al-Al systems.