Scientists and engineers encounter considerable environmental and economic obstacles stemming from the depletion of crude oil or petroleum fossil fuel reservoirs. To mitigate this challenge, alternative solutions like bio-oil-modified binder derived from biomass have been innovated. This research aims to examine the feasibility of using bio-oil-modified binder obtained from cotton stalk waste as a modifier. Various mechanical and physical tests, including penetration, softening point, ductility, and dynamic shear rheometer tests, were conducted on asphalt binder incorporating 5% and 10% bio-oil-modified binder. Wheel tracker, four-point beam fatigue, and dynamic modulus tests were used to evaluate asphalt mixture performance, including rutting, fatigue, and dynamic stiffness. A rolling bottle test (RBT) and asphalt binder bond strength (BBS) were used to assess moisture susceptibility. A bio-oil-modified binder enhanced ductility and penetration characteristics while reducing the softening point. With the addition of a bio-oil-modified binder, stiffness was reduced in parameters such as complex shear modulus and phase angle. In fact, for both specimens containing 5% and 10% bio-oil-modified binder, statistically significant differences were observed among the measured samples. As a result of this reduced stiffness, the modified asphalt binder is more suitable for low-temperature applications. Additionally, 5.8% increased at 10% and 3.1% at 5% CS. Bio-oil-modified binder, compared to virgin mixtures, supports equal rut resistance. However, the RBT and BBS tests revealed that the addition of bio-oil-modified binder increased the susceptibility of conventional asphalt binder to moisture. The findings suggest that bio-oil-modified binder can enhance asphalt binder properties in low-temperature regions, but further research is needed to improve moisture resistance.