In recent years, the growing attention and demand for environmental-friendly products, combined with the need to reduce carbon emissions, microplastic pollution, and plastic contamination in the global ecosystem, has resulted in the development of biodegradable material innovations in a variety of industries. Manufacturing mycelium-based green composites (MBCs) has emerged as a popular notion and a viable alternative to the current production of eco-friendly materials. MBCs are created by growing the vegetative component of mushroom mycelia on various lignocellulosic substrates, which act as a biological binder that bonds substrate particles through a biotechnological process. This technique has the potential to generate a flexible and biodegradable material, offering an alternative to typical synthetic and other conventional materials. Even though MBCs are renewable and biodegradable, they lack some strength, durability, and other critical attributes when compared to traditional materials. To address these disadvantages and realize the full potential of MBCs, agricultural residual waste, which accounts for a significant portion of global solid waste, has emerged as an appealing option for improving the properties of MBCs because it typically contains hemicellulose acting as a binding agent which has a high ability to improve the mechanical and physical properties of composite materials. This approach can produce MBCs that are stronger, more durable, and suitable for a broader range of uses. Furthermore, this research not only adds to the use of eco-friendly materials, but it also helps to achieve the long-term aims of encouraging circular economy principles and minimizing agricultural waste.