Full cost‐effective exploitation of all wood components is key to growing a commercially successful biorefining industry. An innovative process is reported that combines fractionation of lignocellulosic biomass using a low‐cost ionic liquid (Ionosolv) and production of bio‐derived formic acid using polyoxometalates and molecular oxygen (OxFA process). We show that the hemicellulose and part of the lignin were selectively dissolved into the ionic liquid triethylammonium hydrogen sulfate and oxidised in situ to short‐chain, distillable carboxylic acids by a Keggin‐type polyoxometalate with high yields and selectivities. Characterization by several techniques, including ICP‐OES, FTIR, GC, HPLC and NMR spectroscopy confirmed stability of the catalyst over three consecutive POM‐Ionosolv recycles and stable formic acid yields.High formic acid yields of 26 % (pine chips), 23 % (beech chips), and 18 % (Miscanthus) were obtained with respect to the initial carbon content of the biomass, with unprecedented oxidation selectivities for formic acid of 54–62 % depending on vanadium substitution in the polyoxometalate, the processing temperature and the water content in the reaction mixture.. We also demonstrate that the cellulose rich pulp is a suitable source of glucose via enzymatic saccharification. We report cellulose yields of 37% for Miscanthus (from originally 48% glucan content), 33% for pine (from originally 49%) and 31% for beech (from originally 41%) were achieved, and a saccharification yield of up to 25% without optimisation. With further optimisation, this concept has the potential to generate two chemical products directly from lignocellulose in high yields and selectivities and hence a novel avenue for full utilisation of cellulose, hemicellulose and lignin.