We have prepared internally crosslinked nanoparticles from hydroxymethylated lignin via a facile solvent precipitation and hydrothermal curing. Such a scalable approach not only preserves the phenolic hydroxyl groups of lignin but also improves reactivity and stability of the nanoparticles under synthetically relevant conditions. We showed that the stabilized particles function as reducing agents for silver ions to give rise to silver-lignin hybrid particles that function as facile colloidal sensors for hydrogen peroxide. The stability under alkaline conditions can also be exploited for base-catalyzed etherification in the colloidal state as we demonstrated with oxirane ring opening reaction with glycidyltrimethylammonium chloride.