Finding eco-friendly products that are beneficial to the environment and serve as tools for sustainable development is a contemporary challenge. This work illustrates the recovery of bio-waste-based materials, which not only improve the hygrothermal properties of gypsum but also promote the paper and wood recycling processes in a circular economy approach. The samples were subjected to tests for density, water absorption, ultrasonic pulse velocity, flexural strength, compressive strength, and thermophysical property characterization. A statistical analysis of variance was used to study the impact of waste on the physico-mechanical behavior of gypsum, leading to the development of predictive models that can be used to predict and optimize the performance of bio-composites in various applications. The results revealed a reduction in mechanical strength with the addition of waste, but the samples still exhibit superior insulation properties, surpassing commonly used standard boards. By adding ouate and wood wastes to a mass of 20% in its natural state, the gypsum becomes lighter and acts as a better insulator with a reduced density, thermal conductivity, and ultrasound velocity of up to 50%, 57%, and 83%, respectively. These findings show the significant implication of reducing environmental impacts while contributing to the promotion of sustainable building practices, both in new construction projects and in building renovations.