Fast pyrolysis of biomass followed by hydrotreating can contribute to renewable fuel by producing hydrocarbon fuel blendstocks. Upgrading bio-oil via hydrotreating technology can be both capital and operating cost intensive. This study provides an approach to improve the process economics by eliminating the separate hydrocracking step that converts the heavier-than-diesel fraction (residue with boiling point >338 °C) and recycling the residue and co-processing it with stabilized bio-oil in the hydrotreating reactor. We report here the performance of co-processing a pine bio-oil residue with stabilized oak and pine bio-oil in a continuous flow hydrotreater. With the residue co-processing ratios (6/100 to 13.5/100 g/g residue to bio-oil ratio) used in this research, 30–50 % of the residue was converted to lighter products (diesel, jet, and gasoline range products) with no effect on bio-oil conversion. This suggests that parallel hydrotreating and hydrocracking reactions were occurring in the hydrotreater during co-processing with potential synergy between the two components. The study determined economic impact of the improved process, in which the separate hydrocracker was eliminated, and the residue fraction that was recycled to the hydrotreating reactor. The results showed a 6% reduction in the conversion cost. Approximately 57 % of the cost reduction was due to elimination of capital equipment and 43 % was due to lowering operating costs, including decreases in chemical consumption, utilities, and labor.