The conversion of guaiacol to benzene, toluene and o‐cresol along with several important intermediates like phenol, catechol and others in aqueous phase has been theoretically studied under the framework of density functional theory (DFT). The bond dissociation energy (BDE) calculation has been performed on optimized structures of guaiacol, phenol and anisole; and accordingly several reaction pathways have been proposed. The thermochemical parameters like Gibb's free energy change and enthalpy change of the reactions have also been reported using M06‐2X functional. In BDE study of the three compounds, i. e., guaiacol, phenol and anisole, it is observed that the scission of H. at fifth carbon position of an aromatic ring is the highest energy demanding dissociation, whereas the cleavage of bond from the functional group attached to the aromatic ring has the least BDE. The formation of phenol from guaiacol is more likely to occur by simultaneous hydrogenation and demethoxylation of guaiacol amongst all proposed pathways in aqueous phase. Further, decomposition of phenol to benzene is likely to occur via direct dehydroxylation of phenol. The simultaneous hydrogenation and dehydroxylation of guaiacol in aqueous phase are most likely to produce anisole which can further be reduced to phenol by direct cleavage of methyl group followed by hydrogenation. Further, free energy change landscape shows the conversion of guaiacol to phenol to be kinetically most favourable conversion at low temperature and high pressure in the aqueous phase. Finally, the increase in temperature causes a decrease in Gibb's free energy change and enthalpy change of overall reactions, thereby increasing favourability of most of the reactions in aqueous phase. Furthermore, the comparison between gaseous and aqueous phase results have been made wherever applicable.