Composting is an essential biochemical process to pre-treat lignocellulosic biomass (e.g., wheat straw) to generate nutritious substrate for industrial Agaricus bisporus production. During composting numerous microbes target (hemi-)cellulose using their enzymatic machinery, while lignin has been assumed to remain unaffected. This research aimed to unravel the chemical and microbial changes during a 4-day industrial composting process with special emphasis on the fate of lignin. A recently developed pyrolysis-GC–MS method using a 13C-lignin isolate as internal standard enabled targeted quantitative lignin analysis. As previously demonstrated, a 40% w/w decrease in (hemi-)cellulose was observed, while unexpectedly lignin decreased by 30% w/w. Increased Cα-oxidized moieties and cleaved interunit linkages substantiated this lignin removal. Simultaneously, a microbial community shift towards Alphaproteobacteria, Gammaproteobacteria, Actinobacteria and Sordariomycetes occurred. Hence, the compost environment provided appropriate conditions to harbor a microbial community to alter and degrade lignin, and this research provides new insights into underlying lignin degradation mechanisms.