Density functional theory (DFT), atoms in molecules (AIM) theory, natural bond orbital (NBO) analysis, and Wiberg bond index (WBI) are employed to investigate the mechanism of lignin dissolution and regeneration in 1-allyl-3-methylimidazolium chloride (AmimCl). Lignin is modeled with 1-(4-methoxyphenyl)-2-methoxyethanol (LigOH). From the theoretical results, it is observed that AmimCl interacts with LigOH mainly by hydrogen bonds (H bonds), and the interaction of AmimCl with LigOH is stronger than that of LigOH with LigOH; thus, it can be speculated that lignin can be dissolved in AmimCl. In addition, the H bonds between LigOH and AmimCl are weakened or even destroyed by the addition of water. The experimental results also reveal that lignin can be easily regenerated from the AmimCl lignin solution by the addition of water. The regenerated lignin is characterized by Fourier transform infrared (FTIR) spectroscopy, thermogravimetry (TG), and scanning electron microscopy (SEM) compared to the original lignin.