In order to use lignosulfonates, a byproduct of pulp and paper processes, as an effective water reducer, the physicochemical properties of calcium lignosulfonate (CL) with different molecular weights were investigated. It was found that the adsorptive capacity on the surface of cement particles, surface activity and foam production of CL increase with increasing its molecular weight; however, the zeta potential and hence surface charge of the cement particles show highest values at the CL lower molecular weight fraction (5000–10,000). The physicochemical properties were related to some of the most important concrete performance properties. When the dosage of CL is less than 0.5wt.% of the cement, the CL fraction with a molecular weight of 10,000–30,000 gives a maximum fluidity in the cement paste. The CL fraction of a high molecular weight has a stronger air-entraining effect, and hence decreases the compressive strength of concrete. Because there exist intrinsic limitations with CL as a water reducer (none of CL fractions can give good results on both fluidity and compressive strength), the original CL was further chemically modified into GCL1 by increasing its sulfonic groups, resulting in an average molecular weight around 10,000. This new compound gives to an increase in its charge density, and hence a higher zeta potential in its absolute value. Compared with CL, the surface tension of GCL1 solutions is lower, indicating possibly stronger wetting capability. GCL1 also has a larger adsorption capability on cement particles, and produces more hydrated ettringite needles in its microstructure. Furthermore, GCL1 shows comparable fluidity and compressive strength data to formaldehyde condensates (FDN), a gold standard of water reducer materials. This modified CL may be a potentially very useful water reducer.