Hydrothermal carbonization (HTC) is a promising method for the production of energy dense coal-like material from low quality lignocellulosic biomass. The process takes place in the presence of water and therefore is unaffected by feedstocks containing a high moisture content. However, the substantial water requirement and disposal concerns for a large scale HTC plant may outweigh its advantages from an economical and environmental point of view. The work presented in this study proposes a solution to the aforementioned problem. Miscanthus feedstock was treated hydrothermally at three different reaction temperatures (190, 225, and 260 °C) for 5 min with a solid load ratio of 1:6. The liquid by-product from each experiment was characterized for chemical composition. The results show that the HTC process water was rich in organic acids (acetic, formic, levulinic, and glycolic acid), Hydroxy-methyl-furfural (HMF), and total organic carbon (TOC). The acidity and the concentration of intermediate products in the HTC process water increased with an increase in reaction temperature. The HTC process water produced at 260 °C was examined for the recirculation of process water. The results show that, during successive recirculation of HTC process water, the mass yield of the hydrochar samples increases by 5–10% and the energy yield of the hydrochar samples increased up to 15% compared to the HTC-reference sample (hydrochar sample produced at initial run). Most importantly, the HHV of hydrochars increased from 18.9 (raw biomass) to 26.6 MJ/kg (maximal value) during recirculation of process water. As a result, the recirculation of process water can increase the overall system’s efficiency and reduce both the operating costs and environmental impact of a commercial HTC plant.