CeO2 was synthesized hydrothermally in supercritical water and applied to the catalytic pyrolysis of xylan. Acetic acid, which is the main component in bio-oil produced from the non-catalytic pyrolysis of xylan, deteriorates the fuel quality of the oil. Catalysis over CeO2 effectively converted the acetic acid to ketone species, such as acetone, thereby reducing the acidity of the oil considerably. The content of aromatics in bio-oil was also increased substantially by catalysis.