Biocompatible composites, generated from renewable biomass feedstock, are regarded as promising materials that could replace synthetic polymers and reduce global dependence on fossil fuel sources. Wood cellulose, the most abundant biopolymer on earth, holds great potential as a renewable biomass feedstock. To unlock the entire scope of potential benefits of this feedstock, the wood components - namely cellulose, hemicellulose and lignin - need to be separated and processed individually. Current methods to separate wood components, such as Kraft pulping for example, suffer considerable drawbacks and cannot be considered environmentally benign. This thesis aims to increase our understanding of the interaction between ionic liquids (ILs) and biomass, in order to develop superior biomass processing techniques necessary to ensure a rapid transformation of our society towards full sustainability. The first part of this work deals with the particular interaction of ILs with cellulose, and aims to investigate the structural requirements of ILs in order to qualify as a cellulose solvent. The cellulose-dissolving behaviour of selected alkanolammonium ILs was studied, and, combined with the results of an extensive literature review, a novel concept for the interaction of cellulose-dissolving ILs with cellulose was developed. It was postulated that efficient cellulose solvents need to position themselves in a distinct manner - with respect to the cellulose chain - in order to offer H-bond interaction sites with enhanced stability. As a result, alternative ions for cellulose-dissolving ILs were proposed, including oxazolium, 1,3-oxaphospholium, dimethylcarbamate, phosphate, nitrate, and nitrite. The second part of the work investigated the use of food-additive based ILs for the separation of wood lignin, and studied the influence of selected process parameters, such as extraction time, extraction temperature, IL moisture content, wood particle size, wood species, IL cation species, solvent composition, and IL recyclability on the lignin extraction efficiency. The lignin extract and the wood residues were characterised via infrared spectroscopy, elemental analysis, thermogravimetric analysis, differential scanning calorimetry, X-ray diffraction, and gel permeation chromatography. An extraction efficiency of e = 0.43 of wood lignin was achieved in one gentle extraction step ( T = 373 K, t = 2 h), and it was found that the presence of a co-solvent increased the extraction efficiency to e = 0.60. Gentle conditions during IL treatment did not decrease the crystallinity of the wood sample, and the extracted lignin had both a larger molecular mass and a more uniform molecular mass distribution, compared to commercially available Kraft lignin. The outcomes of both studies were critically evaluated, addressing existing drawbacks and restrictions that need to be considered, and possibilities for future work were suggested.