Kraft lignin was modified by using hydroxymethylation to enhance the compatibility between rubber based on a blend of natural rubber/polybutadiene rubber (NR/BR) and lignin. To confirm this modification, the resultant hydroxymethylated kraft lignin (HMKL) was characterized using Fourier transform infrared (FTIR) and nuclear magnetic resonance (NMR) spectroscopy. It was then incorporated into rubber composites and compared with unmodified rubber. All rubber composites were investigated in terms of rheology, mechanical properties, aging, thermal properties, and morphology. The results show that the HMKL influenced the mechanical properties (tensile properties, hardness, and compression set) of NR/BR composites compared to unmodified lignin. Further evidence also revealed better dispersion and good interaction between the HMKL and the rubber matrix. Based on its performance in NR/BR composites, hydroxymethylated lignin can be used as a filler in the rubber industry.