Biomass utilization is an attractive option for production of fuels and chemicals in the wake of global concern over continuing use of fossil fuels. Biomass can be thermochemically upgraded via gasification, liquefaction or pyrolysis to obtain fuel and/or valuable chemicals. Overall, gasification occurs at high temperature and results in a predominantly gas product. Liquefaction requires relatively low temperature and quite high pressure, and gives a high-quality liquid product. Pyrolysis takes place at moderate temperatures and produces the crude bio-oil. However, the resulting bio-crude is highly oxygenated while containing multiple impurities and disadvantageous to be used as a fuel. Due to the complex and expensive reactor systems associated with liquefaction, pyrolysis is the preferred method for biomass conversion. Hydrotreating or catalytic cracking for the crude oil upgrading either requires large consumption of expensive hydrogen or suffers from low H/C ratios without H-2 supply. A novel process named methanolysis allows pyrolysis and catalytic conversion to occur simultaneously under a methane environment, which has shown promise. Due to the original complexity of biomass and the resulting bio-oil, biomass-derived model compounds are extensively employed to investigate the involved reaction mechanisms. This article reviews the current technologies and the progress regarding methane upgrading of biomass based on model compound studies. Through catalyst development, better understanding of methane upgrading mechanisms, and kinetics investigations, biomass valorization with methane could become a viable alternative to the formation of fuels and valuable chemicals widely practiced in industries nowadays.