The increasing demand for food necessitates that agri-food systems adopt innovative techniques to enhance food production while optimizing the use of limited resources, such as water. In agriculture, hydrogels are being increasingly used to enhance water retention and reduce irrigation requirements. However, most of these materials are based on synthetic polymers that are not biodegradable. This raises serious environmental and health concerns, highlighting the urgent need for sustainable, biodegradable alternatives. Biomass-derived from agro-industrial waste presents a substantial potential for producing hydrogels, which can effectively function as water collectors and suppliers for crops. This review article provides a comprehensive overview of recent advancements in the application of agro-industrial waste for the formulation of hydrogels. Additionally, it offers a critical analysis of the development of hydrogels utilizing natural and compostable materials. Agro-industrial and food waste, which are rich in hemicellulose and cellulose, have been utilized to enhance the mechanical properties and water absorption capacity of hydrogels. These biomaterials hold significant potential for the development of effective hydrogels in agricultural applications; they can be either hybrid or natural materials that exhibit efficacy in enhancing seed germination, improving water retention capabilities, and facilitating the controlled release of fertilizers. Natural hydrogels derived from agro-industrial waste present a sustainable technological alternative that is environmentally benign.