Compared to carbon fibers made from conventional petroleum-based precursors, lignin-based carbon fibers can lower the production cost while enabling cleaner manufacturing. The use of lignin-based carbon fibers is currently hindered by their poor mechanical properties that are mainly attributed to the lack of orientability in lignin structure. Herein, we demonstrated a novel method of producing high-quality carbon fiber, by which lignin is first transformed into a new precursor polymer with a linear molecular orientation, and the precursor is subsequently melt-processed. Specifically, a raw red oak lignin bio-oil consisting of multifunctional compounds with distributed molecular weights was converted into a lightly branched, acrylate polymer via a hybrid functionalization followed by controlled radical polymerization. By carefully investigating different synthesis parameters and determining the effects of the intrinsic properties of the crude lignin bio-oil have on the polymerization, a melt-spinnable thermoplastic polymer could be obtained in high yield. The new polymer was then used to produce carbon fiber with average tensile strength of 1.70 GPa and tensile modulus of 182 GPa. Our analysis results indicated that the new precursor structure can improve the degree of graphitization and reduce structural defects in the resulting carbon fiber. Structural analyses showed that the carbon fiber contains a highly ordered and well-stacked turbostratic structure. Overall, this study presents a promising approach to produce low-cost, high-quality carbon fiber that may have applications in the automobile industries.