Hydrothermal liquefaction (HTL) is an efficient technology for converting biomass to platform compounds. It has great potential for reducing the dependence on fossil fuels. The HTL of waste biomass has been extensively studied in recent years due to both its environmental and economic benefits. However, most woody waste contains a large amount of cellulose, and it is difficult to be sufficiently decomposed to valuable chemicals. Phycocyanin, a key component of algae, is easily degraded under high-temperature liquefaction conditions. In this work, focusing on bio-oil generation properties, the co-liquefaction characteristics and synergistic mechanisms of α-cellulose and phycocyanin were explored. The findings revealed a maximum bio-oil yield of 33.1 wt% under the optimal conditions (300 °C for 40 min), with a notable positive synergistic effect of 13.5 wt%. Chemical composition analysis indicated distinct compositional differences between the bio-oils derived from individual and dual feedstock. The amounts of pyridine and pyrimidine compounds increased due to the enhanced co-liquefaction. The results also highlighted the influence of temperature on the degree of conversion and product distribution. Finally, preliminary chemical reaction pathway was elucidated, underscoring the potential of integrating microalgae and woody biomass for enhanced bio-oil production.