Nanocellulose is the renewable biopolymer produced in nature by different bacteria. The widespread use of nanocellulose in industrial processes increases the demand for this valuable biomaterial. To overcome the high cost of producing nanocellulose using the Hestrin–Schramm medium, alternative agricultural waste has been studied as a potential low‐cost supply. This study investigated the optimization and physicochemical characterization of cellulose membrane obtained, utilizing a low‐cost substrate—‐papaya peel‐based medium, with Novacetimonas hansenii BMK‐3.The maximum yield of nanocellulose was found at an inoculum age 24 h, inoculum size 10% (v/v), incubation time 15 days, pH 3.5, media:flask volume ratio 1:2.5, and temperature 30°C. Cellulose yield produced using the papaya peel‐based medium was nearly four times more than using the Hestrin–Schramm medium. The structural and physical properties of cellulose were characterized using field emission scanning electron microscopy, Fourier‐transform infrared spectroscopy, X‐ray diffraction, thermogravimetric analysis, and derivative of thermogravimetric analysis. Cellulose produced using papaya peel‐based medium had similar properties to cellulose produced in the Hestrin–Schramm medium. The results suggested papaya peels as a cost‐effective substrate for cellulose production with enhanced yield. This study reports an eco‐friendly approach for the management of papaya peels waste disposal and production of value‐added product. This is the first report mentioning the valorization of papaya fruit peel waste for the production of cellulose.