The combined dewatering process and dry separation in a vibration fluidized-bed dryer was developed to upgrade Chinese lignite in terms of moisture and ash for effective utilization in power plants. The influence of operational parameters (fluidizing gas velocity, vibration strength, bed height, and drying temperature) and lignite properties (particle size and moisture content) on the drying or separation characteristics of -6-1 mm lignite was examined in a laboratory-scale vibration fluidized-bed dryer. Both operational parameters and lignite properties had a significant effect on the drying and separation performance. The drying and separation behaviors of a vibration fluidized bed were both enhanced in comparison to the case without vibration under the same operating conditions. Moreover, with the change in gas velocity, the drying and separation processes could be combined in the same vibration fluidized-bed dryer. Both processes achieved promising results compared to those of the fixed gas velocity condition, which was confirmed by the low calorific value analysis. A sequential drying and separation system in a vibro-fluidized-bed dryer was also designed on the basis of the separation and drying characteristic results.