Thermal modification of wood in a hot-oil bath is a green process, which improves wood properties using natural products. The process imparts a uniform brown color to the wood and increases its dimensional stability. The improved properties create value-added opportunities for some wood species to be used for high performance applications such as flooring products. This study focused on the optimization of the oil-heat-treatment process to find different approaches for saving energy and also evaluating the performance of water-based coatings on oil-heat treated wood. Effects of process variables on development of wood drying defects such as, checking, cupping, crooking, bowing, twisting, and grain raise were evaluated. This included investigation of effects of Initial wood moisture content and delayed cooling of treated wood in an oven or under a thermal blanket. Our results showed that wood can be treated at an initial moisture content around 8 to 10 percent and cooled in a blanket instead of in an oven without increasing wood defects. Testing the performance of four commercially formulated water-based coatings on heat-treated wood showed that the coatings had an overall better color retention, abrasion, and scratch resistance on the heat-treated wood than on the untreated wood. However, the adhesion of all of the coatings was lower on the heat-treated wood when compared with untreated wood samples.