Sugarcane bagasse, a by-product of sugar industry is a potential lignocellulose biomass for bio-oil production by hydrothermal liquefaction (HTL). The catalyst and the reaction parameters are important for the higher bio-oil yield. Hence, by the sol-gel method, cobalt oxide catalyst was synthesized, characterized by FTIR, X-ray diffraction, nitrogen adsorption and studied for the HTL of sugarcane bagasse with varying reaction time, catalyst/biomass weight ratio and water/biomass weight ratio. Formation of face-centered cubic spinel of Co3O4 was confirmed from the XRD peaks at 2Θ positions of 18, 31, 37, 45, and 65° and FTIR absorption bands at 558 and 654 cm−1 attributed to stretching vibrations of Co-O, having the Co3+ in octahedral and tetrahedral coordination respectively. A high BET surface area of 413.63 cm2/g obtained may be attributed to the citric acid added during sol-gel synthesis, which got decomposed off during the calcination. The highest yield of bio-oil was found to be 57.6% at the reaction time of 120 min, catalyst/biomass ratio of 0.4, water/biomass ratio of 28, 250°C and initial CO pressure of 45 bars, compared to 35.2% for non-catalytic HTL, confirmed its catalytic activity.