Mycelium-based composites (MBCs) have emerged as eco-friendly alternatives, utilizing fungal mycelium as a natural binder for agro-industrial residues. This study focuses on developing an MBC based on abundant waste in Colombia, pith Arboloco (A) (Montanoa quadrangularis), a plant endemic to the Colombian–Venezuelan Andes with outstanding insulating properties, and natural fiber of Kikuyu grass (G) (Cenchrus clandestinus), utilizing Ganoderma lucidum as an agent to form a mycelium network in the MBC. Three formulations, T (100% A), F1 (70% A/30% G), and F2 (30% A/70% G), were evaluated under two different Arboloco particle size ranges (1.0 to 5.6 mm) for their physical, mechanical, and thermal properties. The Arboloco particle sizes did not show significant differences in the MBC properties. An increase in Kikuyu grass proportion (F2) demonstrated superior density (60.4 ± 4.5 kg/m³), lower water absorption (56.6 ± 18.4%), and better compressive strength (0.1686 MPa at 50% deformation). Both mixing formulations (F1–F2) achieved promising average thermal conductivity and specific heat capacity values of 0.047 ± 0.002 W m⁻¹ K⁻¹ and 1714 ± 105 J kg⁻¹ K⁻¹, comparable to commercial insulation materials. However, significant shrinkage (up to 53.6%) and high water absorption limit their scalability for broader applications. These findings enhance the understanding of MBC’s potential for non-structural building materials made of regional lignocellulosic waste, promoting a circular economy in waste management for developing countries.