Hydrothermal treatment (HT) is traditionally used as an approach for upgrading lignite. But this approach has a limited effectiveness for upgrading high-ash lignite. In this study, we explore a new method for substantial upgrading of lignite. The method is first to deoxygenate lignite by HT and then to demineralize lignite by successive Ca(OH)(2) digestion/acid leaching (abbreviated as HT-D method). For a lignite enriched with quartz and clays, the O/C atomic ratio and the ash content were reduced from 0.30 to 0.09 and from 24.1% to 3.5% (dry basis), respectively, by an optimal HT-D treatment at both HT and digestion temperatures of 330 degrees C. The higher heat value (HHV) was increased from 17.4 MJ kg(-1) to 29.7 MJ kg(-1) via this treatment, in contrast to a smaller enhancement to 22.1 MJ kg(-1) via the HT only. The presence of acidic functional groups in the raw lignite was found to strongly impede the alkalization reactions of mineral species. The first HT was a critical step for improving the subsequent demineralization through the elimination of acidic functional groups. Many trace elements including Li, Be, V, Mn, Ga, As, Se, Cr and Pb were removed to a large extent by the HT-D treatment.