With the increasing prominence of global environmental issues and the growing demand for sustainable development, biomass composites have attracted widespread attention as candidates for environmentally friendly and renewable construction materials. In this study, environmentally friendly biomass-ash composites (BACs) were fabricated using hydrothermally activated incinerated sewage sludge ash (HT-ISSA) as filler and straw powder with waste sawdust as the biomass matrix for hot pressing. An investigation was conducted into the effect of HT-ISSA on the physical properties of the composite, including the bending strength, compressive strength, and thermal conductivity. The composite prepared with 15 wt% HT-ISSA demonstrated an exceptionally high bending strength (30.60 MPa), compressive strength (44.76 MPa), and low thermal conductivity (0.2380 W/m·K). The enhanced physical properties of the BAC material are attributable to the change caused by hydrothermal treatment of the filler phase. Due to the introduction of hydrated calcium silicate, the cohesion performance of the filler significantly improved, thus leading to strong adhesion and penetration within the matrix. The obtained BAC is applicable for packaging and insulation materials, thus providing an effective solution for the economical and environmentally friendly recycling of incinerated sewage sludge ash and other bulk solid waste. Additionally, it contributes novel insights into alleviating the current shortage of forest resources.