<p>This study investigated the potential of upcycled, large-diameter wool fibres—often considered waste—as a sustainable, high-performance material for nonwoven thermal insulation. Driven by circular economy principles, the primary objective was to quantitatively assess the thermal performance of nonwoven fabrics from wool and other typical fibres, focusing on the critical roles of fabric structure and ambient humidity. A bespoke set of nonwoven samples, made up of 100% wool, 100% polyester, and wool/polyester blends, was manufactured to present a range of structural variables, including thickness, density and porosity). To simulate real-world conditions, samples were conditioned under four controlled humidity states (H0, H42, H65, and H99). The thermal resistance (Rt) and relative moisture vapour permeability (RMVP%) were measured (after conditioning at four different humidity levels) on the Alambeta and Permetest instruments. The capacity of the wool to regulate humidity in a micro-climate was analyzed using a custom method. A strong positive correlation was confirmed between fabric thickness and Rt, indicating that the air trapped within the highly porous structure is the primary factor in determining insulation performance. Within samples of comparable thickness, structural variables had almost no correlation with Rt. This key finding suggests that coarser wool can be effectively used in nonwoven structures for insulation without compromising Rt. The highly hygroscopic wool structures exhibited a distinct dependence on moisture content, demonstrating how moisture affects thermal performance. The superior moisture sorption capacity and ability to buffer humidity within a micro-climate highlight the unique benefits of wool. These findings strongly support the repurposing of coarse, upcycled wool into nonwoven structures as a viable, environmentally friendly, and efficient alternative for technical insulation applications.</p>