A pyrolysis oil derived from a lignocellulosic biomass material is converted into precursors for liquid hydrocarbon transportation fuels by contacting the oil with water and carbon monoxide at elevated temperature, typically from 280 to 350° C., an elevated pressure, typically a total system pressure of 12 to 30 MPa and a CO partial pressure from 5 to 10 MPa and a weight ratio of water:biomass oil from 0.5:1 to 5.0:1, to dissolve the oil into the reaction mixture and depolymerize, deoxygenate and hydrogenate the oil, so converting it into liquid transportation fuel precursors.