Thermal upgrading is a promising way to improve the quality and broaden the range of use of lignite. This paper investigated the characteristics of organic sulfur evolution in a Chinese lignite from Shengli coalfield in the process of thermal upgrading by a fluidized-bed reactor under different atmospheres. The results showed that 5 min of fluidization of feed coal within the temperature range from 200 to 500 degrees C was capable to obtain a preferable upgraded coal with the increase of the calorific value and the decrease of the moisture. The removal of total sulfur via thermal upgrading, reaching the top at about 60%, was attributed to the evolution of organic sulfur. X-ray photoelectron spectroscopy results showed that aliphatic, aromatic and thiophene, and sulfone sulfur were the major organic sulfur species in Shengli lignite (SL). Aliphatic sulfur was the most unstable organic sulfur and began to release at 200 degrees C. Aromatic sulfur was found to release at 300 degrees C. Thiophene sulfur was most stable and could not be removed even if the temperature reached 500 degrees C under different environments. Thermal decomposition was the primary approach for the evolution of organic sulfur during thermal upgrading. The addition of oxygen and ethanol in the environments showed different capabilities for selective decomposition of organic sulfur species in coal. Despite the increased combustible matter loss, a mild oxidizing environment provided a possible method for the lignite thermal upgrading using the flue gas from the mine mouth power plant. On the other hand, the organic environment could effectively increase the removal of organic sulfur in coal, which could be achieved at low temperatures.