Sugarcane is currently one of the most efficient crops in the production of first generation biofuels. However, the bagasse represents an additional abundant lignocellulosic resource that has the potential to increase the ethanol production per plant. To achieve a more efficient conversion of bagasse into ethanol, a better understanding of the main factors affecting biomass recalcitrance is needed. Because several studies have shown a negative effect of lignin on saccharification yield, the characterization of lignin biosynthesis, structure and deposition in sugarcane is an important goal. Here, we present the first systematic study of lignin deposition during sugarcane stem development, using histological, biochemical and transcriptional data derived from two sugarcane genotypes with contrasting lignin contents. Lignin amount and composition were determined in rind (outer) and pith (inner) tissues throughout stem development. In addition, the phenolic metabolome was analyzed by ultrahigh-performance liquid chromatography-mass spectrometry, which allowed the identification of 35 compounds related to the phenylpropanoid pathway and monolignol biosynthesis. Furthermore, the sugarcane EST Database was extensively surveyed to identify lignin biosynthetic gene homologs and the expression of all identified genes during the stem development was determined by qRT-PCR. Our data provide the first in-depth characterization of lignin biosynthesis in sugarcane and form the baseline for the rational metabolic engineering of sugarcane feedstock for bioenergy purposes.