Degradative solvent extraction (DSE) is effective in both dewatering and upgrading biomass wastes through the selective removal of oxygen functional groups. However, this conversion mechanism has yet to be elucidated. Here, liquid membrane-FTIR spectroscopy was utilized to examine the main liquid product (Solvent-soluble) without sample modification. Rice straw (RS) and 1-methylnaphthalene (as a non-hydrogen donor solvent) were used as materials, and measurements were performed at treatment temperatures of 200, 250, 300, and 350 °C for 0 min, and at 350 °C for 60 min. The Solvent-soluble spectra were quantitatively analyzed, and changes in the oxygen-containing functional groups and hydrogen bonds at each temperature were used to characterize the DSE mechanism. It was determined that the DSE reaction process can be divided into three stages. During the first stage, 200–300 °C (0 min), oxygen was removed via dehydration, and aromaticity was observed. In the second stage, 300–350 °C (0 min), deoxygenation reactions involving dehydration and decarboxylation were followed by reactions for aromatization. For the third stage, 350 °C (0–60 min), further aromatization and dehydration reactions were observed. Intramolecular reactions are indicated as the predominant mechanism for dehydration in RS DSE, and the final product is composed of smaller molecular compounds.