Hydrothermal liquefaction of cypress was performed in an autoclave with various amounts of water. The obtained acid-soluble and acid-insoluble solid residues were characterized by Fourier transform infrared spectroscopy, X-ray diffraction, sugar analysis, elemental analysis, and nuclear magnetic resonance to help understand the reaction mechanisms of this process. The characteristics of solid residues were significantly affected by the water amount. Cellulose was more stable at high water amount and hemicelluloses were much more reactive than cellulose. Comparison of nuclear magnetic resonance spectra of milled wood lignin and milled solid residues indicated a significant cleavage of the side chains. The components of milled solid residues were mainly derived from decomposition and repolymerization of lignin. The decomposition of the side chains was substantial for lignin depolymerization during hydrothermal liquefaction.