A new class of catalytic ionic liquids, 1-butyl-3-methylimidazolium chloride [BMIM][FeCl4] and its modified version, 1-butyl-3-methylimidazolium tetrachloroferrate [BMIM][FeCl4], were systematically investigated. The modified ionic liquid [BMIM][FeCl4] was used to upgrade heavy crude oils. The effects of the reaction temperature and the amount of water on the upgrading of heavy crude oils were studied. The reduction of viscosity by [BMIM][FeCl4] is remarkable when the amount of water in the heavy crude oil is less than 8%. It was found that [BMIM][FeCl4]-based ionic liquids have the best effect on the heavy crude oil upgrading at the optimum temperature between 7090 degrees C. The results show that the viscosity reduction increased from 26.8 to 78.6% when the heavy crude oil was treated with [BMIM][FeCl4] at 90 degrees C. Also, the sulfur reduction increased to 20%. [BMIM][Cl] and [BMIM][FeCl4] were studied by physicochemical methods and catalytic activity measurements in upgrading of heavy oils.