Date palm fiber (DPF) holds great potential for composite materials, but its flammability limits its practical applications. In this study, DPF was modified using a pad-drying method to impregnate it with a 5 wt.% solution of ammonium dihydrogen phosphate (ADP). These treated fibers were then utilized to fabricate poly(β-hydroxybutyrate)- (PHB-) based composites. The resulting thermal insulators were comprehensively evaluated for their flammability, physical, mechanical, and thermophysical properties, as well as morphological and thermal stability characteristics. The findings revealed a significant reduction in flame spread and smoke suppression; however, the concentration used is not sufficient to achieve the desired rating grades. The thermal insulation capacity of the modified fiber composites was substantially enhanced, particularly with the 40% PHB/DPF-ADP composite displaying the lowest thermal conductivity at 0.0564 W/m.K. Moreover, the presence of gaps and voids at the interface led to a reduction in tensile strength to 4-7 MPa. Additionally, the modified fiber composites exhibited significantly reduced water absorption (~0.76%), attributed to the formation of a highly water-resistant substance containing a furan compound. This work provides a simple and effective approach for achieving durable flame retardancy and long-term thermal insulation performance, offering promising opportunities for the practical application of biobased PHB composites.