Poly(butylene adipate-co-terephthalate) (PBAT) is a biodegradable polymer but has limited thermal and mechanical properties. Lignin, a byproduct of the pulp and paper industry, can be an eco-friendly bio-filler to improve the properties of PBAT composite. However, the complex structures and feedstock variability of lignin are major challenges of this lignin application. In this research, to overcome these challenges, we conducted lignin fractionation with different solvent concentrations. The different lignin fractions were analyzed to understand their physicochemical properties by gel permeation chromatography (GPC), nuclear magnetic resonance (NMR), thermogravimetric analysis (TGA), and differential scanning calorimetry (DSC). The PBAT/lignin composite was fabricated by a twin-screw mixer and injection molding machine with different lignin fractions. Based on the processibility and performance of the PBAT/lignin composites, further investigation of the mechanical and thermal properties of PBAT/lignin composite was conducted with different lignin loadings. The impacts of lignin-filler in biocomposite application were discussed based on the effect of the physicochemical properties of lignin on the thermomechanical properties of PBAT/lignin composite. The fundamental understanding of the correlations between lignin characteristics and the properties of lignin-based composite will be very important clues in future lignin-based composite applications.