The use of high residual lignin containing cellulose nanofibrils (LNFCs) has been explored for first time for reinforcing epoxy resins. Alkali treated bark fibers with 23wt% residual lignin were mechanically fibrillated to LCNF aqueous suspensions with average fibril diameter of 62.5±24.7nm. The addition of 20–36wt% of LNFCs to pure neat epoxy had almost doubled the tensile modulus and strength of the resulting composites. These novel composites showed much better mechanical properties than those reported in the literature with a similar loading amount of cellulose nanofibrils. The resultant composites showed high thermal stability with only a slight reduction in the thermal degradation temperatures compared to the neat epoxy resin. A very low degree of water absorption and water vapour transmission rate were obtained for the composites. The water vapour barrier efficiency of the composites increased by more than 156 times and eight times higher than the pure LNFC films and the cured neat epoxy, respectively.