Hydrothermal liquefaction is a promising resource recovery technique to valorize wet lignocellulosic agro residues. In this study, hydrothermal liquefaction of bagasse was performed at different temperatures (280, 300, 320 °C), reaction times (15, 30, 45 min), and amount of KOH catalyst (5, 7.5, 10 wt%) in the presence of methanol as a co-solvent. The process conditions were optimized using response surface methodology to maximize the yield of bio-crude and its higher heating value (HHV). Maximum bio-crude yield of 36.3 wt% was obtained at 320 °C, 15 min and 10 wt% KOH. The bio-crude yield was found to depend on temperature, amount of KOH, and the interaction of reaction time and amount of KOH. Maximum HHV of bio-crude (34.6 MJ kg−1) was recorded at 320 °C, 45 min and 10 wt% KOH, and this condition corresponded to highest deoxygenation achieved in the bio-crude. The major organic constituents in the bio-crude were cyclo-oxygenates, phenolics, and esters, and their combined selectivity was 78–83%. Maximum energy recovery of 56% was obtained. The energy content of the solid residue was high (∼23 MJ kg−1) at the center point corresponding to 300 °C, 30 min and 7.5 wt% KOH. The process exhibited positive energy gain with favorable sustainability metrics. © 2022 Elsevier Ltd