Due to the negative effects of acids and aldehydes, crude bio-oil has to be upgraded before its application as a high-graded fuel. A novel method for bio-oil upgrading by simultaneous catalytic esterification and alkylation with azeotropic water removal using n-butanol and 2-methylfuran was investigated in this work. Under the optimum upgrading conditions, water content was evidently decreased from 27.82% to 321%, and acid number was reduced from 41.12 mg NaOH/g to 6.17 mg NaOH/g. High heating value of upgraded bio-oil was more than 2 times higher than crude bio-oil and the other properties were also improved significantly. GC-MS analysis indicated that labile adds, aldehydes, ketones and lower alcohols were transformed to stable target products. The introduction of 2-methylfuran effectively suppressed acetalization reactions and the yields of more stable alkylation products were higher than acetals. In addition, oxygenated liquid fuel and sugars and their derivatives could be effectively separated from upgraded bio-oil by H2O/CH2Cl2 extraction. The main product in crude sugars part was butyl-beta-D-glucopyranoside, which was formed by means of hydrolysis of levoglucosan and the following glycosidation. (C) 2016 Elsevier B.V. All rights reserved.