Asphalt is a viscoelastic material which performs to resist rutting, fatigue cracking, and moisture susceptibility under different loading and temperature conditions. The use of innovative and renewable pavement construction materials is inevitable due to high axle loads, rapidly increasing traffic volumes, and varying climatic conditions. This study aims to assess the effect as well as the optimum dosage of paper waste lignin for use in hot mix asphalt (HMA). Lignin from the paper industry with dosage ratios of 5, 10, 15, and 20%, was utilized to study the effect of the addition of lignin to the asphalt binder. Virgin and lignin-modified binder samples, before and after the aging process, were subjected to physical testing through penetration, softening point, ductility, viscosity and specific gravity and rheological characteristics through dynamic shear rheometer (DSR), bending beam rheometer (BBR), and rational viscometer (RV).. The fractional composition was assessed through saturates, aromatics, resins and asphaltenes (SARA) fractional composition technique. Statistical analysis was also performed to find correlation of different physical and rheological parameters. Furthermore, based on optimum dosage, the performance of asphalt mixtures was studied against rutting, fatigue cracking, and moisture susceptibility. The results indicated that the addition of lignin has improved the physical properties significantly. The amount of asphaltene decreased and aromatics increased in SARA fractional analysis. Moreover, the Colloidal Instability Index (CII) has also indicated a stable structure of the binder. The rheological characteristics are improved after modification. The asphalt mixture tests revealed that addition of lignin with optimum dosage (10%) has improved the performance against rutting, fatigue cracking and moisture susceptibility. Statistical analysis indicated good co-relation among different physical and rheological parameters. This study concludes that 10% dosage is the optimum dosage that can successfully replace the virgin asphalt binder for performance of hot mix asphalt.