The building industry plays a critical role in achieving carbon neutrality, due to its significant worldwide energy and material consumption. The ability of nature-based design elements like wood-based materials to perform sustainably has led to their growing appeal in urban areas. Within this context, the study explores novel sustainable materials called translucent wood (TCW) and transparent wood (TW). These materials have numerous advantages in terms of thermal conductivity, light transmittance, increased energy efficiency on integration with solar panels and greater strength compared to glass. This study explores the application of TCW and TW in three specific areas of building i.e., as alternative for glass in windows for better thermal performance, for enhanced daylight, and as alternative material for integration in solar panels. Simulations were done using Ladybug and Honeybee tools (version 1.6.0)—Plugin for Rhinoceros 7 and Grasshopper 3d software. The study also elucidates the factor of sustainability of TW in terms of Life Cycle Analysis (LCA) and its global projected market. TW proves to be a promising material which can be scaled up efficiently in future and has the potential to replace plastic and ordinary glass in the construction industry contributing towards urban sustainability.