Owing to the increasing interest in sustainability and bio-based materials, softwood kraft lignin (SKL) was acetone-fractionated to reduce its heterogeneity and then demethylated to substitute phenol in lignin–phenol–formaldehyde (LPF) resins to be used as bio-based wood adhesives. This study investigated the effect of the demethylation of acetone-soluble SKL (AS-SKL) on the adhesion of LPF resins, where phenol was partially replaced with acetone-soluble demethylated kraft lignin (AS-DKL). Characterization of SKL, AS-KL, and AS-DKL using gel permeation chromatography (GPC), FTIR, and 31P NMR spectroscopy showed that the demethylation was successfully performed; the molecular weight (MW) and the number of methoxy groups decreased, and the number of –OH groups increased. The MW, chemical reactions, and curing behavior of LPF resins synthesized with different AS-DKL levels (10, 20, 30, and 50 wt%) were also characterized. With the increase in AS-DKL content, the viscosity and MW of the resin increased, whereas the gelation time decreased. LPF resins with 10% AS-DKL showed the highest tensile shear strength and lowest peak curing temperature. These results suggest that 10% is an optimal AS-DKL level in LPF resins for plywood bonding and that demethylation is an effective way of utilizing SKL.