Aqueous phase pyrolytic oil is generally considered less important and often discarded as a pyrolysis by-product due to lack of specific applications. Although, recent studies have proposed production of hydrogen via catalytic aqueous and steam reforming from this stream, however, these processes require complex system. Imidazole is one of the major components of aqueous phase pyrolytic oil which can be converted into different products. This study presents a new valorisation strategy of aqueous phase pyrolytic oil into renewable ionic liquid through simulation. A steady state process simulation for recovery of imidazole from aqueous phase pyrolytic oil and subsequent conversion into ionic liquid was developed using ASPEN HYSYS V10 ®. Effects of different operating variables such as feed flow rate, composition and temperature on the imidazole recovery, ionic liquid yield and composition were investigated. The simulation results revealed that high yield of renewable ionic liquid with physicochemical properties comparable to that of commercially available ionic liquids can be produced from aqueous phase pyrolytic oil. This product can be utilised for biomass refining since ionic liquid have been reported to selectively remove hemicellulose and lignin in many biomass related applications such as pre-treatment and characterization.