Lyocell fiber is a green kind of renewable cellulose fiber derived from plants and has many excellent properties. However, in the process of production and application of lyocell fiber, due to swelling and external force, it is easy to produce a serious fibrillation phenomenon. The phenomenon of fibrillation has a very serious impact on the quality and application of lyocell products. To solve this problem, a simple and efficient anti-fibrillation treatment technique was explored in this work. The treatment of lyocell fabric with etherification modified dimethylol dihydroxy-ethylene-urea (ultra-low formaldehyde 2D resin) can enhance the lateral interaction force between the macromolecular chains of lyocell fiber and enhance the anti-fibrillation performance of lyocell fiber. The reaction mechanism between ultra-low formaldehyde 2D resin and lyocell cellulose chain was determined by measuring the fabric mechanical properties, fiber swelling degree, chemical element content, and Fourier transform infrared spectroscopy (FTIR). When the finishing solution contained 100 g/L resin and 20 g/L catalyst with pH 3, after the fabric was cured under 160 ℃ for 60 s, the fibrillation phenomenon of the fiber was greatly reduced. After the treatment of the fabric, its mechanical properties were basically not affected. There was a slight decrease in strength, and the hydrophilic properties were not affected obviously. Compared with the traditional rolling-drying-baking process, this method not only has a shorter and simpler process flow but also has less influence on fabric properties, which guaranteed the smooth progress of the subsequent production and application.