Graphene was manufactured from commercial kraft lignin, and its forming mechanism, structure, and properties were investigated. A single factor test was employed to determine the optimum conditions of the production of graphene nanosheets. Kraft lignin was mixed with iron powders as catalyst with different weight ratios. The mixed carbon source and catalyst were thermally treated at 1000 °C and incubated for a period of time in a tubular furnace. The thermally treated carbon materials were analyzed by field emission scanning electron microscopy (FE-SEM), Raman spectroscopy, atomic force microscopy (AFM), Fourier transform infrared spectroscopy (FTIR), and X-ray diffraction (XRD). The preferable conditions for production of graphene nanosheets from kraft lignin were determined. The graphene fold structure was obtained after thermally treating for 90 min when the ratio of carbon source to iron was 3:1. The results revealed that folded lamellar graphene structure increased with greater holding time. Carbon nanotubes (CNTs) were observed after thermal treatment for 105 min. These results indicate the formation of graphite crystal structure and multi-layered graphene from kraft lignin in the presence of iron catalyst.