Producing cellulosic biofuels and bio-based chemicals from woody biomass is impeded by the presence of lignin polymer in the plant cell wall. Manipulating the monolignol biosynthetic pathway offers a promising approach to improved processability, but often impairs plant growth and development. Here, we show that expressing an engineered 4-O-methyltransferase that chemically modifies the phenolic moiety of lignin monomeric precursors, thus preventing their incorporation into the lignin polymer, substantially alters hybrid aspens’ lignin content and structure. Woody biomass derived from the transgenic aspens shows a 62% increase in the release of simple sugars and up to a 49% increase in the yield of ethanol when the woody biomass is subjected to enzymatic digestion and yeast-mediated fermentation. Moreover, the cell wall structural changes do not affect growth and biomass production of the trees. Our study provides a useful strategy for tailoring woody biomass for bio-based applications.