Autoclaved aerated concrete (AAC) is one of the most common types of lightweight cellular concrete, having a density of approximately one-fourth of that of conventional plain cement concrete. The use of industrial waste materials in concrete as a replacement for cement has garnered a lot of attention in recent years as a way to reduce the environmental effect of concrete. In this study, an attempt has been made to study the effect of AAC blocks made of industrial wastes such as fly Ash (FA) and ground granulated blast furnace slag (GGBS). Fly ash, along with different dosages of GGBS, was used as a partial replacement for cement in the production of AAC. For all the different dosages, microstructural analysis was performed using a Scanning electron microscope (SEM), X-ray diffraction (XRD), energy dispersive X-ray spectroscopy (EDAX), and Fourier transform infrared spectroscopy (FTIR). Mechanical performances of AAC were determined by conducting various tests like compressive strength, modulus of rupture, dry density, and water absorption. The results revealed that the dosage of “15% GGBS + 85% cement” has maximum compressive strength, modulus of elasticity, and modulus of rupture made of Class F Fly Ash when compared to Class C Fly Ash based AAC blocks. Besides, the incorporation of GGBS in the manufacturing process would increase the compressive strength of AAC up to 68%. Hence, it is recommended to use 15% GGBS + 85% cement as a potential rate of replacement, to improve the mechanical properties of AAC blocks significantly.