This research explores the carbon removal of a novel bio-insulation composite, here called MycoBamboo, based on the combination of bamboo particles and mycelium as binder. First, an attributional life cycle assessment (LCA) was performed to define the carbon footprint of a European bamboo plantation and a bio-insulation composite, as well as its ability to remove CO₂ along its lifecycle at a laboratory scale. Secondly, the Global Worming Potential (GWP) was estimated through a dynamic LCA with selected end-of-life and technical replacement scenarios. Finally, a building wall application was analyzed to measure the carbon saving potential of the MycoBamboo when compared with alternative insulation materials applied as an exterior thermal insulation composite system. The results demonstrate that despite the negative GWP values of the biogenic CO₂, the final Net-GWP was positive. The technical replacement scenarios had an influence on the final Net-GWP values, and a longer storage period is preferred to more frequent insulation substitution. The type of energy source and the deactivation phase play important roles in the mitigation of climate change. Therefore, to make the MycoBamboo competitive as an insulation system at the industrial scale, it is fundamental to identify alternative low-energy deactivation modes and shift all energy-intensity activities during the production phase to renewable energy.