The invention discloses a processing method of lignite, comprising the following steps: A, taking methyl alcohol as extractant to carry out supercritical extraction processing to the lignite to obtain extraction liquid and raffinate; B, carrying out hot melt catalysis liquefaction processing to the raffinate to obtain liquid fuel. The invention has the beneficial effect: 1, the invention has moderate reaction condition, simple operation technology, high liquid oil yield, high domestication degree, low input and low cost and is safe and stable, and higher conversion rate of lignite; 2, the invention can obtain humic acid, organic acid methyl ester and phenol substances (phenyl hydroxide, cresol, dimethyl phenol and the like) and increase the additional value of products; 3, the supercritical methyl alcohol adopted by the invention removes R-OH and R-COOH class micromolecule substances in the lignite, which can reduce hydrogen consumption amount in the process of hot melt catalysis liquefaction so as to reduce hydrogen consumption; meanwhile, CO2 discharge amount in the process of hot melt catalysis liquefaction can be greatly reduced so as to achieve the purpose of greenhouse gas emission reduction; and 4, the invention performs swelling pretreatment to the lignite, changes lignite micropore structure, amplifies response ratio superficial area and improves the conversion rate of the lignite.