This study aims to focus on developing a food supplement for the geriatric population using disposal mushrooms, oats, and lactose-free milk powder. Lactose intolerance is most common in older adults, raising the demand for lactose-free foods. One of the major global challenges currently faced by humankind is food waste (FW). Most of the food that is produced for human consumption has not been utilized completely (1/3rd–1/2 unutilized), resulting in agricultural food waste. Mushrooms are highly valuable in terms of their nutritional value and medicinal properties; however, a significant percentage of mushroom leftovers are produced during mushroom production that do not meet retailers’ standards (deformation of caps/stalks) and are left unattended. Oats are rich in dietary fibre beta-glucan (55% water soluble; 45% water insoluble). Lactose-free milk powder, oats, and dried mushroom leftover powder were blended in different ratios. It was observed that increasing the amount of mushroom leftover powder increases the protein content while diluting calories. The product with 15% mushroom powder and 30% oat powder showed the highest sensory scores and the lowest microbial count. The GCMS and FTIR analyses confirmed the presence of ergosterol and other functional groups. The results of the XRD analysis showed that the product with 15% mushroom powder and 30% oat powder had a less crystalline structure than the product with 5% mushroom powder and 40% oat powder and the product with 10% mushroom powder and 35% oat powder, resulting in more solubility. The ICP-OES analysis showed significant concentrations of calcium, potassium, magnesium, sodium, and zinc. The coliform count was nil for the products, and the bacterial count was below the limited range (3 × 102 cfu/g). The product with 15% mushroom powder and 30% oat powder showed the best results, so this developed product is recommended for older adults.