In this study, we explored the catalytic hydrocracking of pyrolytic lignin (PL) under supercritical methanol conditions. This approach aimed to minimize coke formation and prevent solidification of bio-oil, thus improving its manageability and upgrade potential in subsequent steps. Hydrocracking of PL at 250°C for 2 h with HZSM-5, Ni/HZSM-5, and Ni-Ru/HZSM-5 catalysts revealed a dominance of repolymerization over hydrocracking. Consequently, the methanol-soluble oil portion decreased to <37.8 wt%, accompanied by an increase in product molecular weight. However, by co-depositing Ni and Ru on ceria-impregnated HZSM-5 catalysts, the yield of methanol-soluble oil increased to 48.5–56.1 wt%, while the molecular weight decreased. By optimizing reaction parameters using Ni-Ru/Ce-HZSM-5 (NRC4H) at 300°C for 1 h, a methanol-soluble yield of 52.5 wt% was achieved, along with a substantial reduction in molecular weight. The interaction of Ni, Ru, and Ce elements on the catalyst's acidic surface led to smaller Ni and Ru particles and improved reducibility, resulting in a suitable acid-base balance that effectively suppressed repolymerization and enhanced hydrocracking. Furthermore, the detection of methane in the gas product served as an indicator of the hydrogenation reaction of double bonds during the hydrocracking process.